ALASKA AIR GROUP, INC. (ALK)

CIK: 0000766421. SIC: 4512 Air Transportation, Scheduled. Latest 10-K as of: 2026-02-12.

SIC breadcrumb: Transportation, Communications, Electric, Gas, And Sanitary Services > SIC Major Group 45 > SIC 4512 Air Transportation, Scheduled

SEC company page: https://www.sec.gov/edgar/browse/?CIK=766421. Latest filing source: 0000766421-26-000010.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000766421.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000766421.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0000766421-26-000021.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment. MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2025. This overview summarizes the MD&A, which includes the following sections:

•First Quarter Review - highlights from the first quarter of 2026 outlining some of the major events that occurred during the period.

•Results of Operations - an in-depth analysis of our financial and operational results for the three months ended March 31, 2026.

•Liquidity and Capital Resources - an overview of our financial position, analysis of cash flows, and relevant material cash commitments.

•GAAP to Non-GAAP Reconciliations - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis.

Dollar amounts in the MD&A are generally rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures presented in the tables below.

FIRST QUARTER REVIEW

We reported a loss before income tax under GAAP for the first quarter of 2026 of $317 million, compared to $233 million for the first quarter of 2025. Refer below for a more detailed discussion of the items impacting these results.

First quarter results were negatively impacted by multiple external factors. Fuel prices increased dramatically as a result of ongoing geopolitical events and market disruptions. Civil unrest in Puerto Vallarta and historic rainstorms in Hawai'i reduced demand in key leisure markets ahead of the peak spring break travel period. These markets represent approximately 30% of Air Group capacity. Despite these headwinds, demand remained resilient and the company continued to execute on its Alaska Accelerate initiatives.

During the quarter, Alaska Airlines entered into a multi-year extension and expanded partnership with its co-branded credit card bank partner, Bank of America, enhancing loyalty program economics and long-term growth. The agreement drives incremental cash remuneration in 2026 and beyond. Alaska Airlines also reached an agreement with Amazon that improves the economics of cargo operations under the ATSA.

In April 2026, the Company implemented a single passenger service system, an integration milestone that consolidates reservation and customer service platforms across Alaska and Hawaiian. Also in April, Hawaiian officially joined the oneworld alliance, which will bring significant global travel benefits to guests and will help the company in its continued global expansion efforts.

19

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2026 TO THREE MONTHS ENDED MARCH 31, 2025

OPERATING STATISTICS

Below are operating statistics we use to measure operating performance. We often refer to unit revenue and adjusted unit costs, which are non-GAAP measures.

Three Months Ended March 31,

2026

2025

Change

Revenue passengers (000)

13,332

13,159

1.3%

RPMs (000,000) "traffic"

17,300

17,257

0.2%

ASMs (000,000) "capacity"

21,570

21,219

1.7%

Load factor

80.2%

81.3%

(1.1) pts

Yield

16.88¢

16.28¢

3.7%

PRASM

13.54¢

13.24¢

2.3%

RASM

15.30¢

14.79¢

3.5%

CASMex

12.37¢

11.64¢

6.3%

Fuel cost per gallon

$2.98

$2.61

14.2%

Fuel gallons (000,000)

267

262

1.9%

ASMs per gallon

80.7

80.9

(0.2)%

Departures (000)

125.5

123.8

1.4%

Average full-time equivalent employees (FTEs)

31,465

29,773

5.7%

Operating fleet

413

399

14 a/c

OPERATING REVENUE

Total operating revenue increased $163 million, or 5%. The changes are summarized in the following table:

Three Months Ended March 31,

(in millions)

2026

2025

% Change

Passenger revenue

$

2,920 

$

2,808 

4 

%

Loyalty program other revenue

227 

207 

10 

%

Cargo and other revenue

153 

122 

25 

%

Total Operating Revenue

$

3,300 

$

3,137 

5 

%

The table below presents total operating revenue by principal geographic region (as defined by the U.S. Department of Transportation) and the percentage of change of certain operational results for the three months ended March 31, 2026.

Three Months Ended March 31, 2026

% Change vs. Prior Year

(in millions)

Total Operating Revenue

Passenger Revenue

RPMs

ASMs

Yield

RASM

Domestic

$

2,931 

6%

1%

3%

4%

4%

Latin America

217 

(13)%

(19)%

(17)%

8%

8%

Pacific

152 

2%

12%

9%

(9)%

(9)%

Total

$

3,300 

4%

—%

2%

4%

3%

20

Passenger revenue

Passenger revenue increased $112 million, or 4%, primarily driven by higher yield from premium cabin demand and strong managed corporate travel. These increases were partially offset by temporary demand softness in Puerto Vallarta and Hawai'i during the peak spring break travel period.

Loyalty program other revenue

Loyalty program other revenue increased by $20 million, or 10%, primarily due to the launch of the Summit Visa Infinite premium credit card and the Atmos Rewards program in August 2025. The launch drove higher commission revenue from bank card and third-party partners, supported by growth in total active members and higher consumer spend. Additionally, Alaska extended and expanded its co-branded credit card agreement with Bank of America during the quarter, which also contributed to the increase.

Cargo and other revenue

Cargo and other revenue increased by $31 million, or 25%, primarily driven by higher revenue under the ATSA with Amazon, as two additional A330-300F aircraft were added to the fleet since the first quarter of 2025 and an amendment to the agreement in the first quarter of 2026 resulted in improved economics. In addition, higher cargo volumes associated with services to Tokyo and Seoul contributed to the increase.

OPERATING EXPENSES

Total operating expenses increased $245 million, or 7%. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Three Months Ended March 31,

(in millions)

2026

2025

% Change

Aircraft fuel

$

796 

$

681 

17 

%

Non-fuel operating expenses, excluding special items

2,748 

2,562 

7 

%

Special items - operating

35 

91 

(62)

%

Total Operating Expenses

$

3,579 

$

3,334 

7 

%

Aircraft fuel

Aircraft fuel expense consists primarily of raw fuel expense, which generally reflects the "into-plane" price paid at the airport, as well as other taxes and fees. Raw fuel prices are influenced by global crude oil prices and refining costs, which can vary by region in the U.S. We primarily purchase fuel based on U.S. West Coast and Singapore jet fuel prices.

Three Months Ended March 31,

(in millions)

2026

2025

% Change

Crude oil

$

469 

$

452 

4 

%

Refining margins

255 

152 

68 

%

Other(a)

72 

77 

(6)

%

Aircraft fuel

$

796 

$

681 

17 

%

Fuel gallons

267 

262 

2 

%

Fuel cost per gallon

$

2.98 

$

2.61 

14 

%

(a) Includes taxes and other into-plane costs.

Aircraft fuel expense increased $115 million, or 17%, due to higher per gallon fuel costs driven by elevated refining margins and crude oil prices. Incremental fuel consumption resulting from additional capacity also contributed to the increase.

Future fuel cost expectations are highly sensitive to disruption in crude oil supplies and refineries, which have been significantly impacted by recent geopolitical events. We expect that fuel costs will remain elevated for some time.

21

Non-fuel expenses

The table below summarizes our operating expense line items, excluding fuel and other special items. Generally, we expect these expenses to increase in line with capacity, fleet size, and growth of the Company's operations. Significant or unusual changes compared to 2025 are more fully described below.

Three Months Ended March 31,

(in millions)

2026

2025

% Change

Wages and benefits

$

1,242 

$

1,127 

10 

%

Variable incentive pay

30 

62 

(52)

%

Aircraft maintenance

216 

220 

(2)

%

Aircraft rent

61 

62 

(2)

%

Landing fees and other rentals

291 

242 

20 

%

Contracted services

151 

145 

4 

%

Selling expenses

99 

100 

(1)

%

Depreciation and amortization

204 

194 

5 

%

Food and beverage service

95 

85 

12 

%

Third-party regional carrier expense

56 

64 

(13)

%

Other

303 

261 

16 

%

Total non-fuel operating expenses, excluding special items

$

2,748 

$

2,562 

7 

%

Wages and benefits

Wages and benefits increased by $115 million, or 10%. The primary components of Wages and benefits are shown in the following table:

Three Months Ended March 31,

(in millions)

2026

2025

% Change

Wages

$

929 

$

847 

10 

%

Payroll taxes

65 

65 

— 

%

Medical and other benefits

146 

122 

20 

%

Defined contribution plans

95 

86 

10 

%

Pension - Defined benefit plans

7 

7 

— 

%

Total Wages and benefits

$

1,242 

$

1,127 

10 

%

Headcount growth of 6% drove increases across multiple wages and benefits components. Wages increased $82 million, or 10%, driven by higher wage rates across multiple labor groups. Medical and other benefits increased $24 million, or 20%, driven by higher claim volume and large value claims. Defined contribution plans increased $9 million, or 10%, consistent with wage increases.

22

Variable incentive pay

Variable incentive pay decreased by $32 million, or 52%, driven by a lower assumed payout percentage for the Company's Performance-Based Pay program compared to the prior year, partially offset by an increased wage base.

Landing fees and other rentals

Landing fees and other rentals increased by $49 million, or 20%, primarily driven by higher terminal rents resulting from rate increases and growth across the network. Landing fees increased primarily due to higher landed weights. Non-recurring favorable settlements received from certain airports in 2025 also contributed to the year-over-year increase.

Third-party regional carrier expense

Third-party regional carrier expense decreased by $8 million, or 13%, primarily driven by a 12% reduction in departures flown by SkyWest as compared to prior year.

Other expense

Other expense increased by $42 million, or 16%, driven by higher software and professional services costs. Additional pilot training costs, associated with the ramp up of international flying, also contributed to the increase.

Special items - operating

In the first quarter of 2026, we recorded $35 million of operating special items compared to $91 million in the same period in 2025. Refer to Note 10 to the condensed consolidated financial statements for details.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2026, we held $2.6 billion in available liquidity, including unrestricted cash, marketable securities, and undrawn credit facilities. Subsequent to quarter end, the Company exercised the accordion feature under its revolving credit facility, increasing our total available liquidity to $2.9 billion. We also had approximately $20 billion of unencumbered assets, including 124 aircraft and the unencumbered portion of our loyalty program assets. We expect our current unrestricted cash and marketable securities balance, combined with our available sources of liquidity, to be sufficient to fund

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-12. Report date: 2025-12-31.

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

OVERVIEW

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company and the present business environment. MD&A is provided as a supplement to – and should be read in conjunction with – our consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in Item 1A. "Risk Factors" within this document. This overview summarizes the MD&A, which includes the following sections:

33

•Year in Review - highlights from 2025 outlining some of the major events that occurred during the period, as well as forward-looking statements.

•Results of Operations - an in-depth analysis of our financial and operational results for 2025.

•Liquidity and Capital Resources - an overview of our financial position, analysis of cash flows, and relevant material cash commitments.

•GAAP to Non-GAAP Reconciliations and Operating Statistics - reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis, as well as operating statistics we use to measure operating performance.

Dollar amounts in the MD&A are generally rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures represented in the tables below.

This section of the Form 10-K covers discussion of 2025 and 2024 pro forma results, and comparisons between those years. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.

Items affecting comparability

As Hawaiian Holdings, Inc. was acquired by Air Group on September 18, 2024, its financial results were not reflected in reported figures in the periods preceding the acquisition date. As a result, the reported results for 2025 and 2024 are not comparable. To assist with the discussion of 2025 and 2024 results on a comparable basis and provide more meaningful discussion, certain supplemental unaudited pro forma income statement information is provided for 2024. Pro forma historical results were included with the Form 8-K filed on January 22, 2025. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented.

Cybersecurity incident

As previously disclosed in a Current Report on Form 8-K filed on June 27, 2025, on June 23, 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems. Upon identifying this incident, we followed established response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications. Access for all systems was restored. Hawaiian's flights were not interrupted and continued to operate safely throughout our response. We engaged the relevant authorities and experts to assist in our investigation and remediation efforts. Based on the results of the investigation, the incident did not have a material impact on Hawaiian's business, results of operations, or financial condition. For a discussion of our risk factors associated with cybersecurity threats, please refer to Item 1A. "Risk Factors" within this document.

YEAR IN REVIEW

Overview

We reported pretax income under GAAP of $146 million in 2025, compared to $545 million in 2024. On a pro forma basis, pretax income in 2024 was $228 million. Refer below for a more detailed discussion of the items impacting these results.

34

Single operating certificate

On October 29, 2025, Alaska and Hawaiian obtained a single operating certificate from the FAA, officially recognizing Alaska and Hawaiian as one airline under the Alaska certificate.

Labor update

In 2025, Alaska flight attendants, represented by the Association of Flight Attendants (AFA), ratified a new three-year Collective Bargaining Agreement (CBA). Hawaiian flight attendants, represented by AFA, ratified a three-year extension to their existing CBA. Horizon technicians, represented by the Aircraft Mechanics Fraternal Association (AMFA) ratified a four-year CBA. McGee Air Services employees, represented by the International Association of Machinists and Aerospace Workers (IAM) ratified a five-year CBA.

Horizon is negotiating with its pilots represented by the International Brotherhood of Teamsters (IBT), flight attendants represented by the Association of Flight Attendants (AFA), and dispatchers represented by the Transport Workers Union of America (TWU) for updated collective bargaining agreements. A mediator from the National Mediation Board is involved in negotiations with AFA and TWU.

With one exception discussed below, Alaska has begun negotiations for joint collective bargaining agreements (JCBAs) covering each represented Alaska and Hawaiian workgroup. The process for determining which union will represent the combined technicians and related workgroup remains ongoing and, as a result, JCBA negotiations have not begun concerning that workgroup. Alaska intends to initiate those negotiations after the representation issue has been resolved. At December 31, 2025, Transition and Process Agreements have been negotiated for certain workgroups which define the process for negotiating JCBAs and set forth interim agreements until a JCBA is reached.

Loyalty program update

In August 2025, we launched Atmos Rewards, a single loyalty program combining Alaska’s Mileage Plan and Hawaiian’s HawaiianMiles. We also launched a new premium Atmos Summit co-branded credit card. These launches drove significant new card acquisitions, consumer spend, and member redemptions. In September 2025, amendments to the Atmos Rewards co-branded credit card agreement with Bank of America became effective, resulting in changes to the separately identifiable performance obligations.

Irregular operations

In 2025, we experienced multiple operational disruptions. Technology incidents in July and October, involving both internal IT systems and an external third-party cloud services provider, resulted in temporary ground stops, flight cancellations and delays, and periods of irregular operations. These outages negatively impacted pretax earnings by approximately $50 million. In addition, a government shutdown in October led to FAA‑mandated flight reductions and associated cancellations. Although operations normalized quickly after the government reopened, the disruption negatively impacted pretax earnings by approximately $30 million.

Outlook

Looking ahead to 2026, we expect to continue to realize value from Alaska Accelerate initiatives and synergies from the Hawaiian integration, which remain on track or ahead of plan relative to our initial expectations. We expect capacity growth for the year of 2% to 3% compared to the prior year. Given the inherent uncertainty of the macroeconomic environment, we remain focused on disciplined cost management, strong productivity, and delivering on our initiatives.

RESULTS OF OPERATIONS

35

2025 COMPARED WITH PRO FORMA 2024

PRO FORMA OPERATING STATISTICS

Below are operating statistics presented on a pro forma basis, which assumes Hawaiian is included in both 2024 and 2025.

Twelve Months Ended December 31,

2025

2024 As Reported

2024 Hawaiian Airlines(a)

2024 Pro Forma

Change

Consolidated Operating Statistics:

Revenue passengers (000)

58,627

49,238

7,896

57,134

2.6%

RPMs (000,000) "traffic"

77,110

63,871

12,695

76,566

0.7%

ASMs (000,000) "capacity"

92,962

76,167

15,041

91,208

1.9%

Load factor

82.9%

83.9%

84.4%

83.9%

(1.0) pts

Yield

16.64¢

16.68¢

14.56¢

16.33¢

1.9%

PRASM

13.81¢

13.99¢

12.29¢

13.71¢

0.7%

RASM

15.32¢

15.41¢

13.58¢

15.11¢

1.4%

CASMex

11.42¢

10.80¢

11.54¢

10.91¢

4.7%

Economic fuel cost per gallon

$2.52

$2.74

$2.73

$2.74

(8.0)%

Fuel gallons (000,000)

1,146

925

198

1,123

2.0%

ASMs per gallon

81.1

82.3

76.0

81.2

(0.1)%

Departures (000)

543

461

58

519

4.6%

Average full-time equivalent employees (FTEs)

31,585

25,751

6,456

30,144

4.8%

(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.

PRO FORMA OPERATING REVENUE

On a pro forma basis, total operating revenue increased $460 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized in the following table:

Twelve Months Ended December 31,

(in millions)

2025

2024 As Reported

2024 Hawaiian Airlines(a)

2024 Pro Forma

% Change

Passenger revenue

$

12,835 

$

10,654 

$

1,848 

$

12,502 

3 

%

Loyalty program other revenue

855 

733 

84 

817 

5 

%

Cargo and other revenue

549 

348 

112 

460 

19 

%

Total Operating Revenue

$

14,239 

$

11,735 

$

2,044 

$

13,779 

3 

%

(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.

The table below presents operating revenue details by principal geographic region (as defined by the U.S. Department of Transportation), and the percentage change of certain operational results on a pro forma basis for the twelve months ended December 31, 2025.

Twelve Months Ended December 31, 2025

Increase (Decrease) vs. Pro Forma Prior Year

(in millions)

Total Operating Revenue

Passenger Revenue

RPMs

ASMs

Yield

PRASM

Domestic

$

12,855 

3%

—%

2%

3%

1%

Latin America

754 

—%

(1)%

2%

—%

(2)%

Pacific

630 

(2)%

8%

8%

(9)%

(9)%

Total Operating Revenue

$

14,239 

3%

1%

2%

2%

1%

36

Passenger revenue

On a pro forma basis, Passenger revenue increased $333 million, or 3%, as traffic increased by 1% and yield grew by 2%. Hawaiian passenger revenue improved meaningfully, driven by demand environment strength in the state of Hawai'i, as well as benefits from our integration synergies and commercial initiatives. Increased premium cabin revenues, corporate travel, and loyalty program award redemption on our airlines contributed to higher yield. Additionally, prior year results were negatively impacted by $150 million due to the B737-9 grounding in the first quarter of 2024.

Loyalty program other revenue

On a pro forma basis, Loyalty program other revenue increased $38 million, or 5%, due to higher commission revenue from bank card and third party partners, which was driven by increased consumer spend and incremental credit card acquisitions from the launch of the Atmos Rewards program and Summit Visa Infinite premium credit card.

Cargo and other revenue

On a pro forma basis, Cargo and other revenue increased $89 million, or 19%, primarily driven by increased revenue under the ATSA with Amazon following the addition of the four remaining contracted A330-300F aircraft to our cargo fleet in 2025. Increased international cargo volumes driven by the launch of our Seattle-Seoul route also contributed to the increase.

PRO FORMA OPERATING EXPENSES

On a pro forma basis, total operating expenses increased $467 million, or 3%. The changes, including the reconciliation of the impact of Hawaiian on the combined results, are summarized below. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:

Twelve Months Ended December 31,

(in millions)

2025

2024 As Reported

2024 Hawaiian Airlines(a)

2024 Pro Forma

% Change

Aircraft fuel, including hedging gains and losses

$

2,879 

$

2,506 

$

539 

$

3,045 

(5)

%

Non-fuel operating expenses, excluding special items

10,807 

8,314 

1,747

10,061

7 

%

Special items - operating

250 

345 

18

363

(31)

%

Total Operating Expenses

$

13,936 

$

11,165 

$

2,304 

$

13,469 

3 

%

(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.

Fuel expense

Aircraft fuel expense includes raw fuel expense plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases. Our aircraft fuel expense can be volatile because it includes these gains or losses in the value of the underlying instrument as crude oil prices increase or decrease. Raw fuel expense is defined as the price that we generally pay at the airport, or the “into-plane” price, including taxes and fees. Raw fuel prices are impacted by world oil prices and refining costs, which can vary by region in the U.S. Raw fuel expense approximates cash paid to suppliers and does not reflect the effect of our fuel hedges.

Alaska and Hawaiian previously used crude oil call options to hedge fuel expense. Alaska's fuel hedge program was suspended in 2023 and all remaining positions were settled in 2025. Hawaiian's fuel hedge program was suspended in 2025, with all remaining positions settled later in the year. No hedge positions remain open as of December 31, 2025.

We evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. Management considers economic fuel costs to be the best estimate of the cash cost of fuel.

37

Twelve Months Ended December 31,

2025

2024 Pro Forma

(in millions, except for per gallon amounts)

Dollars

Cost/Gal

Dollars

Cost/Gal

Raw or "into-plane" fuel cost

$

2,879 

$

2.51 

$

3,031 

$

2.70 

Losses on settled hedges

4 

0.01 

44 

0.04 

Economic fuel expense

$

2,883 

$

2.52 

$

3,075 

$

2.74 

Mark-to-market fuel hedge adjustments

(4)

(0.01)

(30)

(0.03)

Aircraft fuel, including hedging gains and losses

$

2,879 

$

2.51 

$

3,045 

$

2.71 

Fuel gallons

1,146 

1,123 

On a pro forma basis, aircraft fuel expense decreased by $166 million, or 5%. Raw fuel expense decreased 5% compared to pro forma 2024, primarily driven by lower per gallon costs on crude oil. Decreases were partially offset by higher fuel consumption consistent with increased capacity and higher refining margins associated with the conversion of crude oil to jet fuel.

Losses recognized for hedges that settled during the year were $4 million in 2025, compared to losses of $44 million in pro forma 2024. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.

Non-fuel expenses

The table below summarizes our operating expense line items, excluding fuel and other special items, on a pro forma basis. Generally, increases to these expenses are driven by capacity increases and growth of the Company's operations. Significant or unusual changes compared to 2024 on a pro forma basis are more fully described below.

Twelve Months Ended December 31,

(in millions)

2025

2024 As Reported

2024 Hawaiian Airlines(a)

2024 Pro Forma

% Change

Wages and benefits

$

4,763 

$

3,588 

$

733 

$

4,321 

10 

%

Variable incentive pay

268 

358 

14

372

(28)

%

Aircraft maintenance

912 

620 

224

844

8 

%

Aircraft rent

250 

207 

45

252

(1)

%

Landing fees and other rentals

1,109 

781 

142

923

20 

%

Contracted services

590 

444 

95

539

9 

%

Selling expenses

407 

349 

90

439

(7)

%

Depreciation and amortization

795 

583 

156

739

8 

%

Food and beverage service

383 

287 

68

355

8 

%

Third-party regional carrier expense

272 

243 

—

243

12 

%

Other

1,058 

854 

180

1,034

2 

%

Total non-fuel operating expenses, excluding special items

$

10,807 

$

8,314 

$

1,747 

$

10,061 

7 

%

(a) As provided on Form 8-K filed with the SEC on January 22, 2025, including certain immaterial reclassification and policy adjustments.

Wages and benefits

The primary components of wages and benefits, including a reconciliation of 2024 on a pro forma basis, are shown in the following table:

38

Twelve Months Ended December 31,

(in millions)

2025

2024 As Reported

2024 Hawaiian Airlines(a)

2024 Pro Forma

% Change

Wages

$

3,617 

$

2,701 

$

555 

$

3,256 

11 

%

Payroll taxes

248 

186 

39 

225 

10 

%

Medical and other benefits

522 

417 

79 

496 

5 

%

Defined contribution plans

347 

256 

59 

315 

10 

%

Pension - Defined benefit plans

29 

28 

1 

29 

— 

%

Total Wages and benefits

$

4,763 

$

3,588 

$

733 

$

4,321 

10 

%

(a) The Hawaiian column reflects results prior to the consummation of the merger, comprising the period January 1, 2024 to September 17, 2024.

On a pro forma basis, wages and benefits increased $442 million, or 10%, driven by increased headcount and higher wage rates across multiple labor groups in 2025. Increases were partially offset by nonrecurring wages from irregular operations following the B737-9 grounding in the first quarter of 2024.

On a pro forma basis, medical and other benefits expense increased $26 million, or 5%, driven by an increase in the cost of medical services and higher costs associated with our pilots long-term disability plan. Defined contribution plan expense increased $32 million, or 10%, driven by higher contribution rates for pilots and flight attendants.

Variable incentive pay

On a pro forma basis, variable incentive pay expense decreased $104 million, or 28%, driven by a lower payout percentage for the Company's Performance-Based Pay program compared to the prior year, partially offset by an increased wage base and inclusion of Hawaiian employees in the plan.

Aircraft maintenance

On a pro forma basis, aircraft maintenance expense increased $68 million, or 8%, primarily driven by incremental maintenance projects and material costs on cabin refresh initiatives. Also, Horizon engine maintenance increased due to additional coverage under its power-by-the-hour engine maintenance agreement during the year.

Landing fees and other rentals

On a pro forma basis, landing fees and other rental expense increased $186 million, or 20%, primarily driven by increased terminal rents due to higher rates and growth throughout the combined network. Increased volume of departures and landed weight, as well as nonrecurring favorable settlements received from certain airports in 2024 also contributed to the year-over-year increase.

Contracted services

On a pro forma basis, contracted services expense increased $51 million, or 9%, driven by higher rates charged by vendors as well as increased departures and passengers throughout our combined network.

Selling expenses

On a pro forma basis, selling expenses decreased $32 million, or 7%, primarily driven by lower marketing costs in comparison to pro forma prior year. Increased credit card vendor rebates driven by higher consumer spend also contributed to this decrease.

Depreciation and amortization

On a pro forma basis, depreciation and amortization increased $56 million, or 8%, primarily due to the addition of 23 owned aircraft to our fleet during the year. Incremental depreciation on ground service and other equipment also contributed to the increase.

39

Food and beverage service

On a pro forma basis, food and beverage service expense increased $28 million, or 8%, primarily driven by a 5% increase in departures and higher costs for food, food service supplies, and transportation.

Third-party regional carrier expense

On a pro forma basis, third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $29 million, or 12%, driven by incremental departures and block hours operated by SkyWest.

Other expenses

On a pro forma basis, other expense increased $24 million, or 2%, driven by higher professional services and software costs. Increases were partially offset by gains of $57 million from the sale of 12 B737-900 aircraft and certain nonrecurring passenger remuneration and crew hotel costs associated with the B737-9 grounding in 2024.

Special items - operating

On a pro forma basis, special items decreased $113 million, or 31%, driven by decreased integration costs associated with the Hawaiian acquisition and nonrecurring costs in 2024 associated with Alaska flight attendant retroactive pay, the retirement of Alaska's Airbus and Horizon's Q400 aircraft, and certain litigation matters. Contractual changes to Alaska flight attendants' sick leave benefits in 2025 partially offset this decrease. Refer to Note 15 to the consolidated financial statements for details.

Additional Segment Information

Refer to Note 13 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's results.

Alaska Airlines

Alaska Airlines reported a pretax profit, excluding special items and other adjustments, of $526 million in 2025, compared to $744 million in 2024. The $218 million decrease was primarily driven by a $407 million increase in non-fuel operating expenses, largely attributable to higher wages and increased variable costs, net of a $136 million decrease in variable incentive pay. These impacts were partially offset by $39 million in increased revenue and $185 million in lower fuel costs due to lower per gallon costs.

Hawaiian Airlines

Hawaiian Airlines reported a pretax loss, excluding special items and other adjustments, of $189 million in 2025, compared to a pro forma loss of $359 million in 2024. The $170 million improvement was driven by $370 million in increased revenue, the result of higher traffic and yield due to the optimization of Hawaiian assets in Air Group's combined network, demand environment strength in the state of Hawai'i, as well as continued recovery following the 2023 Maui wildfires. This amount was partially offset by increased non-fuel operating expenses of $192 million driven by increased capacity and variable costs, as well as higher variable incentive pay due to the inclusion of Hawaiian employees in the Company's Performance-Based Pay program.

Regional

Regional reported a pretax loss, excluding special items and other adjustments, of $1 million in 2025, compared to a profit of $111 million in 2024. The $112 million decrease was primarily due to $154 million in increased non-fuel operating expenses associated with increased capacity and variable costs. The decrease was partially offset by $48 million in increased revenue as incremental traffic mitigated the impact of a weaker yield environment.

40

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2025, we had cash and marketable securities of $2.1 billion, excluding restricted cash. We also had 103 unencumbered aircraft, which can be financed if necessary, and an $850 million bank line-of-credit facility with no outstanding borrowings. We expect our current cash and marketable securities balance, combined with our available sources of liquidity, to be sufficient to fund our liquidity needs for the next 12 months. We expect to meet our liquidity needs for the foreseeable future using cash flows from our operations, our available sources of liquidity, and future financing arrangements. We discuss our sources and uses of cash in more detail below.

Operating cash flows

Cash provided by ticket sales and from our co-branded credit card agreements are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, aircraft fuel, payments to suppliers for goods and services, payments to lessors and airport authorities for leased aircraft, rents, and landing fees, and interest expense for our debt obligations. Operating cash flow also includes payments to, or refunds from, federal, state, and local taxing authorities.

In 2025, cash provided by operating activities was $1.2 billion, compared to $1.5 billion in 2024. Advance ticket sales and our co-branded credit card agreements are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, aircraft fuel, payments to suppliers for goods and services, payments to lessors and airport authorities for leased aircraft, rents, and landing fees, and interest expense for our debt obligations. In 2025, this includes more than $300 million paid to employees in recognition of their 2024 Performance-Based Pay program achievements. It also includes $98 million paid to Starlink associated with an agreement to provide in-flight connectivity on Alaska's fleet.

Investing cash flows

Capital expenditures to acquire aircraft, flight equipment, and other property and equipment is the primary use of investing cash flow. Total capital expenditures in 2025 were $1.6 billion, compared to $1.3 billion in 2024, excluding the acquisition of Hawaiian. We discuss our aircraft-related commitments in more detail below.

Cash used in investing activities was $1.6 billion in 2025, compared to $634 million in 2024. In 2025, property and equipment expenditures were $1.6 billion, driven by the addition of new aircraft as well as other equipment purchases. Net purchases of marketable securities were $190 million in 2025. These amounts were partially offset by other investing cash inflows of $155 million, including proceeds from the sale of 12 B737-900 aircraft. The difference compared to the prior year was due to a combination of factors. In 2024, we paid $659 million to acquire Hawaiian Airlines, net of Hawaiian's cash balances. We received $162 million in compensation from Boeing related to the B737-9 grounding. We also had $929 million in net sales of marketable securities, driven by the liquidation of Hawaiian's investment portfolio.

Financing cash flows

Cash provided by new financing arrangements is the primary source of our financing cash flow. Our primary uses of financing cash flow are payments of our debt service and finance lease obligations, as well as share repurchases. Refer to Note 5 to the consolidated financial statements for a detailed discussion of our debt balances, including a schedule outlining future payments.

Cash used in financing activities was $199 million in 2025, compared to cash provided by financing activities of $119 million in 2024. Cash used for share repurchases was $570 million, and debt payments were $519 million. These outflows were partially offset by proceeds from new financing arrangements, net of debt issuance costs, of $808 million. The difference compared to the prior year was primarily driven by additional share repurchases in 2025.

Indicators of financial condition and liquidity

The Company's liquidity target is between 15% and 25% of the trailing twelve months' revenue. This metric was elevated as of December 31, 2024 as it did not include a full year of Hawaiian revenue, but has returned to target levels as of December 31, 2025.

41

The table below presents the major indicators of financial condition and liquidity:

(in millions)

December 31, 2025

December 31, 2024

Change

Cash, marketable securities, and unused lines of credit(a)

$

2,973 

$

3,325 

(11)%

Trailing twelve months' revenue

$

14,239 

$

11,735 

21%

Liquidity as a percentage of trailing twelve months' revenue

21

%

28

%

(7) pts

Long-term debt and finance leases, net of current portion

$

4,834 

$

4,538 

7%

Shareholders’ equity

$

4,118 

$

4,372 

(6)%

(a) Excludes restricted cash of $28 million as of December 31, 2025 and $29 million as of December 31, 2024.

Debt-to-capitalization, including leases

(in millions)

December 31, 2025

December 31, 2024

Change

Long-term debt and finance leases, net of current portion

$

4,834 

$

4,538 

7%

Capitalized operating leases

1,338 

1,405 

(5)%

Current portion of finance lease liabilities(a)

181 

8 

NM

Adjusted debt, net of current portion of long-term debt

$

6,353 

$

5,951 

7%

Shareholders' equity

4,118 

4,372 

(6)%

Total invested capital

$

10,471 

$

10,323 

1%

Debt-to-capitalization, including leases

61%

58%

(a) To best reflect our leverage, we included our short-term finance lease liabilities, which are recognized within 'Current portion of long-term debt and finance leases' in our condensed consolidated balance sheets.

Material cash commitments

We have various contractual obligations that require material future outlays of cash. These obligations include the purchase of aircraft and other flight equipment, payments for Alaska's CPA with SkyWest, debt service payments, lease payments for aircraft and other property and equipment, costs for aircraft and engine maintenance, sponsorship and license agreements, and other miscellaneous agreements for services associated with operating and marketing our airlines. We also anticipate we may have material cash outlays associated with new technologies for the future of the business. Currently, Alaska has agreements to purchase sustainable aviation fuel (SAF) to be delivered in the coming years. These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF. We expect to satisfy these obligations using cash flows from our operations, our available sources of liquidity, and future financing arrangements.

Within the notes accompanying our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, refer to Note 5 for discussion of scheduled debt obligations, Note 6 for discussion of future minimum payments for operating and finance leases, and Note 9 for discussion of aircraft-related purchase commitments and CPA obligations. We are also obligated to make periodic interest payments at fixed and variable rates, depending on the terms of our debt agreements. As of December 31, 2025, these interest obligations are expected to be $254 million in 2026, $266 million in 2027, $230 million in 2028, $211 million in 2029, $162 million in 2030, and $217 million thereafter.

As of December 31, 2025, Alaska had firm orders to purchase 174 B737 aircraft, with deliveries expected between 2026 and 2035, and firm orders to purchase 12 B787 aircraft with deliveries expected between 2026 and 2032. Alaska also had rights for 71 additional B737 aircraft through 2035. Horizon had firm orders to purchase three E175 aircraft with deliveries in 2026. Alaska also has an agreement with SkyWest Airlines to expand our long-term capacity purchase agreement by one aircraft in 2026.

42

Boeing has communicated that certain B737 and B787 aircraft are expected to be delivered later than the contracted delivery timing. This includes certain B737-8 aircraft contracted for delivery in 2025 and 2026 that have moved into 2026 and 2027, and certain B787 aircraft contracted for delivery in 2025 that have moved into 2026. B737-10 aircraft contracted for delivery between 2027 and 2035 may be delayed pending certification of the aircraft type. Management expects that other Boeing aircraft deliveries could be delayed beyond the contractual delivery. The table below reflects Boeing's communications.

Actual Fleet Count

Anticipated Fleet Activity

Aircraft

Dec 31, 2024

Dec 31, 2025

2026 Changes

Dec 31, 2026

2027 Changes

Dec 31, 2027

2028 Changes

Dec 31, 2028

Mainline Fleet:

B737-700 Freighters

3 

3 

— 

3 

— 

3 

— 

3 

B737-800 Freighters

2 

2 

— 

2 

— 

2 

— 

2 

A330-300 Freighters(a)

6 

10 

— 

10 

— 

10 

— 

10 

A321-200neo

18 

18 

— 

18 

— 

18 

— 

18 

A330-200

24 

24 

— 

24 

— 

24 

(4)

20 

B717-200

19 

19 

— 

19 

— 

19 

— 

19 

B737-700

11 

11 

— 

11 

— 

11 

— 

11 

B737-800

59 

59 

(1)

58 

— 

58 

— 

58 

B737-900

6 

— 

— 

— 

— 

— 

— 

— 

B737-900ER

79 

79 

— 

79 

— 

79 

— 

79 

B737-8

5 

14 

6 

20 

5 

25 

— 

25 

B737-9

72 

80 

— 

80 

— 

80 

— 

80 

B737-10

— 

— 

— 

— 

25 

25 

25 

50 

B787-9

2 

5 

1 

6 

1 

7 

— 

7 

B787-10

— 

— 

— 

— 

— 

— 

4 

4 

Total Mainline Fleet

306 

324 

6 

330 

31 

361 

25 

386 

Regional Fleet:

E175 operated by Horizon

44 

47 

3 

50 

— 

50 

— 

50 

E175 operated by third party

42 

42 

1 

43 

— 

43 

— 

43 

Total Regional Fleet

86 

89 

4 

93 

— 

93 

— 

93 

Total Air Group Fleet

392 

413 

10 

423 

31 

454 

25 

479 

(a) A330-300 freighter aircraft utilized under the ATSA with Amazon.

GAAP TO NON-GAAP RECONCILIATIONS AND OPERATING STATISTICS

We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons:

•By excluding certain costs from our unit metrics, we believe that we have better visibility into the results of operations. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results. We believe that all U.S. carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact of company-specific cost drivers which are more controllable by management. We adjust for expenses related directly to our freighter aircraft operations, including those costs incurred under the ATSA with Amazon, to allow for better comparability to other carriers that do not operate freighter aircraft. We also exclude certain special charges as they are unusual or nonrecurring in nature and adjusting for these expenses allows management and investors to better understand our cost performance.

•CASMex is one of the most important measures used by management and by the Air Group Board of Directors in assessing cost performance. CASMex is also a measure commonly used by industry analysts, and we believe it is the basis by which

43

they have historically compared our airline to others in the industry. The measure is also the subject of frequent questions from investors.

•Adjusted pretax income is an important metric for the employee incentive plan, which covers the majority of Air Group employees.

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

•Although we disclose our unit revenue, we do not, nor are we able to, evaluate unit revenue excluding the impact that changes in fuel costs have had on ticket prices. Fuel expense represents a large percentage of our total operating expenses. Fluctuations in fuel prices often drive changes in unit revenue in the mid-to-long term. Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business.

•Adjusted capital expenditures includes certain amounts that are not classified as investing cash outflows within our consolidated statements of cash flows, but are viewed by management and other stakeholders as significant long-term investments in the business. We believe these adjustments provide a more complete view of our capital expenditures during the year.

We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. Amounts in the tables below are rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to our actual figures presented in the tables below.

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)

Adjusted Income Before Income Tax Reconciliation

Twelve Months Ended December 31,

(in millions)

2025

2024

Income before income tax

$

146 

$

545 

Adjusted for:

Mark-to-market fuel hedge adjustment

(4)

(28)

Losses (gains) on foreign debt

1 

(10)

Special items - operating

250 

345 

Special items - net non-operating

— 

(16)

Adjusted income before income tax

$

393 

$

836 

Pretax margin

1.0 

%

4.6 

%

Adjusted pretax margin

2.8 

%

7.1 

%

44

Adjusted Net Income Reconciliation

Twelve Months Ended December 31,

2025

2024

(in millions, except per share amounts)

Dollars

Per Share

Dollars

Per Share

Net income

$

100 

$

0.83 

$

395 

$

3.08 

Adjusted for:

Mark-to-market fuel hedge adjustments

(4)

(0.03)

(28)

(0.22)

Losses (gains) on foreign debt

1 

0.01 

(10)

(0.08)

Special items - operating

250 

2.08 

345 

2.69 

Special items - net non-operating

— 

— 

(16)

(0.12)

Income tax effect(a)

(54)

(0.45)

(61)

(0.48)

Adjusted net income

$

293 

$

2.44 

$

625 

$

4.87 

(a) Includes income tax effect of the adjustments in the tables above as well as one-time effects of the One Big Beautiful Bill Act which was              signed into law in the third quarter of 2025.

CASMex Reconciliation

Twelve Months Ended December 31,

(in millions, except unit metrics)

2025

2024

Total operating expenses

$

13,936 

$

11,165 

Less the following components:

Aircraft fuel, including hedging gains and losses

2,879 

2,506 

Freighter costs

192 

84 

Special items - operating

250 

345 

Total operating expenses, excluding fuel, freighter costs, and special items

$

10,615 

$

8,230 

ASMs

92,962 

76,167 

CASMex

11.42 

¢

10.80 

¢

Adjusted Capital Expenditures Reconciliation

Twelve Months Ended December 31,

(in millions)

2025

2024

Aircraft and aircraft purchase deposits

$

1,064 

$

817 

Other flight equipment

216 

171 

Other property and equipment

308 

293 

Capital expenditures

1,588 

1,281 

Adjusted for:

Financed aircraft acquisition

69 

68 

Proceeds from sales of aircraft and other equipment

(164)

(11)

Adjusted capital expenditures

$

1,493 

$

1,338 

45

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial position and results of operations in this MD&A are based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect our financial position and results of operations. See Note 1 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a description of our significant accounting policies.

Critical accounting estimates are defined as those that reflect significant management judgment and uncertainties and that potentially may lead to materially different results under varying assumptions and conditions. Management has identified the following critical accounting estimates and has discussed the development, selection and disclosure of these policies with our audit committee.

Atmos Rewards

Atmos Rewards awards points to members who fly on our airlines and our airline partners. We also provide other benefits, including Companion Fare™ certificates, priority boarding, bag fee waivers, and access to our brand and customer lists to major banks that offer our co-branded credit cards. To a lesser extent, points are also sold to other non-airline partners, such as hotels, and car rental agencies. Points can be redeemed for travel on our airlines or eligible airline partners, and for non-airline products such as hotels. Outstanding points held by Atmos Rewards members represent an obligation to provide future travel.

Points and the various other services we provide under Atmos Rewards represent performance obligations that are part of a multiple deliverable revenue arrangement. Accounting guidance requires that we use a relative standalone selling price model to allocate consideration received to the material performance obligations in these contracts. Our relative standalone selling price models are refreshed when contracts originate or are materially modified.

At December 31, 2025, Atmos Rewards program had approximately 480 billion points outstanding, resulting in a deferred revenue balance of $2.9 billion. For the year ended December 31, 2025, Loyalty program revenue recognized from deferred revenue and recorded in passenger revenue was $1.3 billion. Determination of our relative selling price allocations require significant management judgment, impacting revenue recognition and liabilities that we carry on our balance sheet. There are uncertainties inherent in these estimates. Therefore, different assumptions could affect the amount and/or timing of revenue recognition or expenses. The most significant assumptions are described below.

1.The rate at which we defer sales proceeds related to services sold:

We estimate the standalone selling price for each performance obligation, including points, by considering multiple inputs and methods, including but not limited to, the estimated selling price of comparable travel, discounted cash flows, brand value, published selling prices, number of points awarded, and the number of points redeemed. We estimate the selling prices and volumes over the terms of the agreements in order to determine the allocation of proceeds to each of the multiple deliverables.

2.The number of points that will not be redeemed for travel (breakage):

We estimate how many points will be used per award by employing a relative selling price method to allocate revenue from passenger ticket sales between air transportation and earned loyalty points. The portion attributed to points is deferred initially and recognized in passenger revenue upon redemption. We determine the estimated value of points using an equivalent ticket approach, considering historical data on award redemption patterns.

Our estimates are based on the current requirements in our Atmos Rewards program and historical and future award redemption patterns.

We review significant Atmos Rewards assumptions on an annual basis, or more frequently should circumstances indicate a need, and change our assumptions if facts and circumstances indicate that a change is necessary. We regularly update our breakage estimates for the portion of Atmos Rewards points not expected to be redeemed. These estimates are based upon statistical analyses of historical data. A hypothetical 1% change in the amount of outstanding points estimated to be redeemed would result in an approximately $17 million impact on annual revenue recognized.