ALASKA AIR GROUP, INC.ALK
ALASKA AIR GROUP, INC. Leases Disclosure
LEASES
The Company leases property and equipment in the normal course of business under operating and finance leases. Leased assets are categorized into four asset classes: aircraft, capacity purchase arrangements for aircraft operated by third-party carriers (CPA aircraft), airport and terminal facilities, and corporate real estate and other equipment. Operating rent expense is recognized on a straight-line basis over the term of the lease.
As most leases do not provide a readily determinable implicit interest rate, the Company typically utilizes the incremental borrowing rate (IBR) based on information available at the commencement date of the lease to determine the present value of lease payments. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rate.
Aircraft and engines
At December 31, 2025, the Company had leases for 10 B737-800 aircraft, 2 B737-800 freighter aircraft, 14 B737-9 aircraft, 12 A330-200 aircraft, and 4 A321-200neo aircraft. Of these leases, 4 A330-200 aircraft and 2 A321neo aircraft are accounted for as finance leases, while the remaining are accounted for as operating leases. The Company also leases 10 A330-300 freighter aircraft under the ATSA, but because it does not have the right to control the use of the aircraft, the aircraft are not accounted for as a lease in the consolidated financial statements. Remaining lease terms for aircraft range from 1 to 10 years. Some leases have options to extend, subject to negotiation at the end of the term. As extension is not certain, and rates are highly likely to be
renegotiated, the extended term is only capitalized when it is reasonably determinable. While aircraft rent is primarily fixed, certain leases contain rental adjustments throughout the lease term which would be recognized as variable expense as incurred.
Capacity purchase agreements with aircraft (CPA aircraft)
At December 31, 2025, Alaska had a CPA with SkyWest covering 42 E175 aircraft. Under this agreement, Alaska pays the carrier an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. Alaska's CPA with Horizon, a wholly owned subsidiary, does not involve any leased aircraft.
The CPA aircraft have remaining lease terms ranging from 4 years to 9 years. Financial arrangements of the CPA include a fixed component, representing the costs to operate each aircraft which is capitalized. The CPA also includes variable rent based on actual levels of flying, which is expensed as incurred.
Airport and terminal facilities
The Company leases ticket counters, gates, cargo and baggage space, lounge space, office space and other support areas at numerous airports. For this asset class, the Company has elected to combine lease and non-lease components. The majority of airport and terminal facility leases are not capitalized because they do not meet the definition of controlled assets under the standard, or because the lease payments are entirely variable. For airports where leased assets are identified, and where the contract includes fixed lease payments, operating lease assets and lease liabilities have been recorded. The Company is also commonly responsible for maintenance, insurance and other facility-related expenses and services under these agreements. These costs are recognized as variable expense in the period incurred.
The Company leases twelve airport slots at LaGuardia Airport, eight airport slots at Reagan National Airport, and one airport gate at Dallas Love Field to third parties.
Corporate real estate and other leases
Leased corporate real estate is primarily for office space in hub cities, training centers, land leases, and reservation centers. For this asset class, the Company has elected to combine lease and non-lease components under the standard. Other leased assets are comprised of other ancillary contracts and items including Starlink satellite Wi-Fi equipment, leased data center space and ground equipment.
Lease position
Lease-related assets and liabilities recorded on the consolidated balance sheets was as follows:
(in millions) | Balance Sheet Presentation | 2025 | 2024 | ||||||||||||||
Assets | |||||||||||||||||
Operating lease assets | Operating lease assets | $ | 1,268 | $ | 1,296 | ||||||||||||
Finance lease assets | Property and equipment, net | 227 | 53 | ||||||||||||||
Total lease assets | $ | 1,495 | $ | 1,349 | |||||||||||||
Liabilities | |||||||||||||||||
Current | |||||||||||||||||
Operating | Current portion of operating lease liabilities | $ | 197 | $ | 207 | ||||||||||||
Finance | 181 | 8 | |||||||||||||||
Noncurrent | |||||||||||||||||
Operating | Operating lease liabilities, net of current portion | 1,141 | 1,198 | ||||||||||||||
Finance | 65 | 47 | |||||||||||||||
Total lease liabilities | $ | 1,584 | $ | 1,460 | |||||||||||||
Weighted-average remaining lease term (in years) | |||||||||||||||||
Operating leases | 9.1 | 8.9 | |||||||||||||||
Finance leases | 2.6 | 6.5 | |||||||||||||||
Weighted-average discount rate | |||||||||||||||||
Operating leases | 6.7 | % | 6.4 | % | |||||||||||||
Finance leases | 6.2 | % | 6.3 | % | |||||||||||||
Components of lease expense
The components of lease expense for operating and finance leases were as follows:
(in millions) | Income Statement Presentation | 2025 | 2024 | 2023 | |||||||||||||||||||
| Expense | |||||||||||||||||||||||
Operating lease cost | Aircraft rent, Landing fees and other rentals | $ | 279 | $ | 217 | $ | 218 | ||||||||||||||||
Amortization of finance lease assets | Depreciation and amortization | 24 | 2 | — | |||||||||||||||||||
Interest on finance lease liabilities | Interest expense | 5 | 1 | — | |||||||||||||||||||
| Variable and short-term lease costs | Aircraft rent, Landing fees and other rentals | 768 | 557 | 472 | |||||||||||||||||||
| Total lease expense | 1,076 | 777 | 690 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Lease revenue | Cargo and other revenue | (15) | (15) | (15) | |||||||||||||||||||
| Net lease impact | $ | 1,061 | $ | 762 | $ | 675 | |||||||||||||||||
Supplemental cash flow information
The table below presents supplemental cash flow information related to leases. Operating cash flows associated with finance leases were not material for the three years ended December 31, 2025, 2024, and 2023.
(in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Operating cash flows for operating leases | $ | 273 | $ | 241 | $ | 348 | |||||||||||
| Financing cash flows for finance leases | 9 | 31 | 211 | ||||||||||||||
Maturities of lease liabilities
Future minimum lease payments under non-cancellable leases as of December 31, 2025:
Operating Leases | Finance Leases | ||||||||||||||||||||||
(in millions) | Aircraft(a) | Other | Aircraft | Other | |||||||||||||||||||
| 2026 | $ | 244 | $ | 35 | $ | 193 | $ | — | |||||||||||||||
| 2027 | 233 | 29 | 16 | — | |||||||||||||||||||
| 2028 | 213 | 27 | 16 | — | |||||||||||||||||||
| 2029 | 194 | 24 | 16 | — | |||||||||||||||||||
| 2030 | 159 | 24 | 10 | — | |||||||||||||||||||
| Thereafter | 305 | 394 | 14 | 7 | |||||||||||||||||||
Total Lease Payments(a) | 1,348 | 533 | 265 | 7 | |||||||||||||||||||
| Less: Imputed interest | (237) | (286) | (22) | (4) | |||||||||||||||||||
| Total | $ | 1,111 | $ | 247 | $ | 243 | $ | 3 | |||||||||||||||
(a) Future minimum lease payments in the table reflect incentive credits related to leased B737-9 aircraft. As a result, the operating lease liabilities presented on the consolidated balance sheet will not agree to this table.
As of December 31, 2025, we have entered into but not yet commenced leases for Starlink satellite Wi-Fi equipment and for regional aircraft under CPAs. These leases will commence between 2026 and 2027, with lease terms ranging from 2030 to 2038. The liabilities expected with these leases are expected to be approximately $342 million.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.