ALASKA AIR GROUP, INC.ALK
ALASKA AIR GROUP, INC. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
In determining fair value, there is a three-level hierarchy based on the reliability of the inputs used.
Level 1 refers to fair values based on quoted prices for identical instruments in active markets.
Level 2 refers to fair values estimated using significant other observable inputs such as similar instruments in active markets or quoted prices for identical or similar instrument in markets that are not active. Fair values for Level 2 instruments are determined using standard valuation models that incorporate inputs such as quoted prices for similar assets, interest rates, benchmark curves, credit ratings, and other observable inputs or market data.
Level 3 refers to fair values estimated using significant unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets. Fair values for Level 3 instruments are determined using future cash flows and discount rates, which include information obtained from third-party valuation sources and other market sources, including recent offers from potential buyers.
Fair value of financial instruments on a recurring basis
As of December 31, 2025, cost basis and fair value for marketable securities was $1.5 billion. Differences in cost basis and fair value of marketable securities are primarily a result of changes in interest rates and general market conditions. The Company does not believe any unrealized losses are the result of credit quality based on its evaluation and duration exposure, credit ratings of the securities, liquidity profiles, and other observable information as of December 31, 2025.
Fair values of financial instruments on the consolidated balance sheet:
| December 31, 2025 | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Marketable securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | 371 | $ | — | $ | — | $ | 371 | |||||||||||||||
| Equity mutual funds | 8 | — | — | 8 | |||||||||||||||||||
| Asset-backed securities | — | 231 | — | 231 | |||||||||||||||||||
| Mortgage-backed securities | — | 211 | — | 211 | |||||||||||||||||||
| Corporate notes and bonds | — | 663 | — | 663 | |||||||||||||||||||
Municipal securities and other | — | 12 | — | 12 | |||||||||||||||||||
| Total Marketable securities | $ | 379 | $ | 1,117 | $ | — | $ | 1,496 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Marketable securities | |||||||||||||||||||||||
| U.S. government and agency securities | $ | 292 | $ | — | $ | — | $ | 292 | |||||||||||||||
| Equity mutual funds | 7 | — | — | 7 | |||||||||||||||||||
| Asset-backed securities | — | 127 | 7 | 134 | |||||||||||||||||||
| Mortgage-backed securities | — | 112 | — | 112 | |||||||||||||||||||
| Corporate notes and bonds | — | 696 | 2 | 698 | |||||||||||||||||||
Municipal securities and other | — | 31 | — | 31 | |||||||||||||||||||
| Total Marketable securities | $ | 299 | $ | 966 | $ | 9 | 1,274 | ||||||||||||||||
The fair value of interest rate swaps on the balance sheet was not material as of December 31, 2025 and December 31, 2024. The amounts recognized in interest expense and in other comprehensive income were not material in 2025, 2024 and 2023.
Activity and maturities for marketable securities
Maturities for marketable securities:
December 31, 2025 (in millions) | Cost Basis | Fair Value | |||||||||
| Due in one year or less | $ | 354 | $ | 354 | |||||||
| Due after one year through five years | 974 | 979 | |||||||||
| Due after five years through ten years | 152 | 153 | |||||||||
| Due after ten years | 2 | 2 | |||||||||
| No maturity date | 5 | 8 | |||||||||
| Total | $ | 1,487 | $ | 1,496 | |||||||
Proceeds from sales and maturities of marketable securities were $1.3 billion, $1.8 billion, and $1.2 billion in 2025, 2024, and 2023.
Fair value of other financial instruments
The Company uses the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below.
Debt: The estimated fair value of fixed-rate Enhanced Equipment Trust Certificate (EETC) debt and certain variable rate debt is Level 2, while the estimated fair value of $732 million of certain variable-rate and fixed-rate debt, including Payroll Support Program (PSP) notes payable and Japanese Yen denominated debt, is classified as Level 3.
Fixed-rate debt on the consolidated balance sheet and the estimated fair value of long-term fixed-rate debt:
(in millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Fixed-rate debt | $ | 2,761 | $ | 2,946 | |||||||
| Estimated fair value | $ | 2,756 | $ | 2,844 | |||||||
Assets and liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. No material impairments were recorded in 2025.
Equity method and other investments
Air Group has made various investments in funds and companies related to innovation and sustainability in the aviation industry. We account for investments under the equity method if we are able to exercise significant influence over the investee. We record our share of our equity method investees’ financial results within the non-operating expense section of the consolidated statements of operations. Investments for which we do not have significant influence over are recorded at fair value or at cost, adjusted for any changes in price or impairments, if the fair value is not readily determinable. As of December 31, 2025 and December 31, 2024, the combined carrying value of these investments included in Other noncurrent assets in the consolidated balance sheets was $74 million and $51 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 28, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.