ALK

MKT CAP $3.9BP/E —DIV YIELD —FCF YIELD —REV TTM $14.8B +9.8%NET INCOME −$175M −155.9%NET DEBT $5B52W 33.54 – 60.21SEC XBRL · TTM TO Invalid Date

How ALK rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

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Length

−200

words, now 6,986

New in FY2025

Even though we strive to formalize agreements with these vendors that define expected service levels, we may not have the ability to influence performance of all vendors.
In many instances, our competitors have been able to grow and increase their competitive influence by merging with other airlines, as Alaska did with Virgin America in 2016 and Hawaiian in 2024.
Potential difficulties we may encounter as part of the integration process include the following: • the inability to successfully combine the Hawaiian Airlines business with that of Alaska's in a manner that permits us to achieve anticipated net synergies and other anticipated benefits of the acquisition; • successfully managing relationships with our combined customer base and retaining Hawaiian’s customers; • integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies; • managing Alaska Airlines and Hawaiian Airlines as two distinct brands, a strategy that has not been implemented in the U.S. commercial airline industry; • managing Hawaiian's international network successfully, which comprises multiple countries in which Air Group did not have prior experience; • integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running a safe and efficient operation; • disruption of, or the loss of momentum in, our ongoing business; • liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the acquisition, including transition costs to integrate the two businesses that may exceed the costs that we currently anticipate; • maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups; and • retaining key employees of our company If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business the size of Hawaiian, then we may not achieve the anticipated benefits of the acquisition of Hawaiian and our revenue, expenses, operating results and financial condition could be materially adversely affected.
A significant portion of our flights occur to and from our stations in Seattle, Honolulu, Portland, and California.
Our carriers are dependent on limited suppliers for aircraft, aircraft engines, and many aircraft parts.
As a result, we are vulnerable to issues associated with the supply of those aircraft, engines, and parts including design or manufacturing defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public about safety that would result in customer avoidance or actions by the FAA.
Boeing has significant production constraints for the B737 and B787 aircraft, as well as regulatory delays for certain B737 aircraft.
Given our size relative to its competitors, these challenges may have a disproportionate impact on us.
Our airlines are parties to marketing agreements with a number of domestic and international air carriers, or “partners,” including an expanded relationship with American Airlines and other one world carriers.
Alaska's membership in the one world global alliance may limit options to bring non- one world carrier partners into the Atmos Rewards program.
These obligations could lead to liquidity constraints and have a material adverse effect on our financial position.
Certain debt agreements and credit facilities contain customary financial covenants, including compliance with certain debt service coverage ratios and minimum liquidity requirements.
If we fail to comply with any of these covenants and are unable to renegotiate the terms of the agreements, this could result in default and acceleration of our outstanding obligations or repossession of collateral by our lenders.
If a default were to occur, this would have a material adverse impact on our financial position.
The price of jet fuel can be dependent on geography, as refining margins on the West Coast can be elevated compared to other geographic locations.
Due to our concentration on the West Coast, the price of jet fuel may have a disproportionate impact on our operating results compared to other carriers which may have operations that span a larger geographic area.
In accordance with acquisition accounting rules, we recorded goodwill and identifiable intangible assets associated with the acquisitions of Virgin America and Hawaiian on our consolidated balance sheet.
The Company’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal and state income tax purposes may be limited.
At December 31, 2025, Air Group had $2 billion of gross U.S. federal net operating loss (“NOL”) carryforwards, which can be carried forward indefinitely.
Air Group also had $1.7 billion of gross state NOL carryforwards which begin to expire in 2026.
The Company’s ability to utilize these NOLs depends on generating sufficient taxable income in future periods.
In addition, NOLs remain subject to examination and adjustment by federal and state taxing authorities.
If future operating results or economic conditions are less favorable than expected, the company may be required to record additional valuation allowances against its deferred tax assets, which could be material.
This includes internally hosted technologies as well as third-party software solutions, such as our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems.
All of our automated systems cannot be completely protected against events beyond our control, including natural disasters, computer viruses, cyberattacks, unexpected third party IT outages, other security breaches, or telecommunications failures.
In July and October of 2025, Alaska Air Group experienced IT outages that affected operations.
Temporary ground stops were put in place for Alaska and Horizon.
Following the outages, we brought in outside technical experts to diagnose our entire IT infrastructure.
Although we are taking action to ensure the resiliency of our IT infrastructure, additional technology outages may occur in the future which could disrupt operations and may affect our results of operations.
We continue to monitor emerging technologies, including artificial intelligence, that may have disruptive impacts which are out of our control.
Under current or future privacy legislation, both domestically and internationally, we are subject to significant legal risk should we not appropriately protect that data.
Our increasing presence in international locations and our membership in the one world alliance exposes us to additional global regulations and risks.
With our operations to Europe beginning in 2026, we will be subject to the European Union's General Data Protection Regulation, which imposes strict information security requirements and the potential for substantial non-compliance penalties.
The regulatory environment may pose material risks to our business, including additional compliance costs, regulatory enforcement, and legal claims or proceedings.
While we have not experienced a material breach of our systems and information to date, unauthorized parties have previously gained access to our systems and information, including through fraudulent misrepresentation and other means of deception.
In June 2025, Hawaiian Airlines identified a cybersecurity incident affecting certain information technology systems.
Upon identifying this incident, we followed our response protocols and immediately took steps to safeguard our network by disconnecting impacted Hawaiian systems and applications.
Hawaiian's flights were not interrupted and continued to operate safely throughout our response.
Although we have protocols in place to address cybersecurity incidents, unauthorized access to or misuse of the personal and financial information of our guests and employees as a result of a cyber-attack could result in substantial costs for response and remediation, adversely affect our operations and our reputation, and expose us to litigation, regulatory enforcement, or other legal action.
Additionally, a cybersecurity attack impacting our onboard or other operational systems may result in an accident or incident onboard or significant operational disruptions, which could adversely affect our reputation, operation and financial position.

and 7 more.

Gone since FY2024

Even though we strive to formalize agreements with these vendors that define expected service levels, we may not have the ability to influence change with all vendors.
In many instances, our competitors have been able to grow and increase their competitive influence by merging with other airlines, as Alaska did with Virgin America in 2016 and Hawaiian Holdings, Inc. in 2024.
A significant portion of our flights occur to and from our stations in Seattle, Portland, and the Bay Area.
In addition to these markets, the acquisition of Hawaiian Holdings, Inc. in 2024 significantly increases the concentration of our operation in Hawai'i, with Honolulu now representing Air Group's second largest hub.
Alaska is dependent on Boeing as its sole supplier for mainline aircraft and many aircraft parts.
Each carrier is dependent on sole suppliers for aircraft engines for each aircraft type.
Hawaiian is similarly dependent on a limited number of suppliers for its aircraft, aircraft engines, and many aircraft parts.
As a result, we are vulnerable to issues associated with the supply of those aircraft and parts including design or manufacturing defects, mechanical problems, contractual performance by the manufacturers, or adverse perception by the public about safety that would result in customer avoidance or actions by the FAA.
Boeing has significant production constraints for the B737 and B787-9 aircraft, as well as regulatory delays for certain B737 aircraft.
Recently, Boeing was impacted by an employee strike which temporarily halted production of B737 aircraft.
Given Alaska's and Hawaiian's size relative to its competitors, these challenges may have a disproportionate impact on Alaska and Hawaiian.
Our airlines are parties to marketing agreements with a number of domestic and international air carriers, or “partners,” including an expanded relationship with American and other one world carriers.
Alaska's membership in the one world global alliance may limit options to bring non- one world carrier partners into Alaska's Mileage Plan program.
As we evolve our brand we will engage in strategic initiatives that may not be favorably received by all of our guests.
We continue to focus on strategic initiatives designed to increase our brand appeal to a diverse and evolving demographic of airline travelers.
These efforts could include significant enhancements to our in-airport and on-board environments, increasing our direct customer relationships through improvements to our purchasing portals (digital and mobile), and management of our customer loyalty program.
In pursuit of these efforts, we may negatively affect our reputation with some of our existing customer base.
These obligations could lead to liquidity restraints and have a material adverse effect on our financial position.
The price of jet fuel can be dependent on geography and may have a disproportionate impact on our operating results due to our concentration on the West Coast.
In accordance with acquisition accounting rules, we recorded goodwill and identifiable intangible assets associated with the acquisitions of Virgin America and Hawaiian Holdings, Inc. on our consolidated balance sheet.
This includes our airline reservation system, website, telecommunication systems, maintenance systems, airline operations control systems, flight deck/route optimization systems, planning and scheduling, mobile applications and devices, and many other systems.
All of our automated systems cannot be completely protected against events beyond our control, including natural disasters, computer viruses, cyberattacks, other security breaches, or telecommunications failures.
We continue to monitor emerging technologies, including technologies which may have disruptive impacts which are out of our control.
Under current or future privacy legislation, we are subject to significant legal risk should we not appropriately protect that data.
Our presence in international locations and our membership in the one world alliance exposes us to incremental global regulation and therefore risk.
Unauthorized parties have attempted and continue to attempt to gain access to our systems and information, including through fraudulent misrepresentation and other means of deception.
Emerging cybercrime threats include the loss of functionality of critical systems through ransomware, denial of service, or other attacks.
A compromise of our systems, the security of our infrastructure, or those of our vendors or other business partners that result in our information being accessed or stolen by unauthorized persons could result in substantial costs for response and remediation, adversely affect our operations and our reputation, and expose us to litigation, regulatory enforcement, or other legal action.
A cybersecurity attack impacting our onboard or other operational systems may result in an accident or incident onboard or significant operational disruptions, which could adversely affect our reputation, operation and financial position.
Further, a significant portion of our office employees have maintained remote work arrangements, which increases our exposure to cyberattacks, and could compromise our financial or operational systems.
Airlines are subject to extensive regulatory and legal requirements, both domestically and internationally, that involve substantial operational impacts and compliance costs.
In recent years, the state of California and the federal government have enacted and proposed, respectively, rules that significantly expand required disclosures discussing the impact of environmental change.
ACQUISITION AND INTEGRATION OF HAWAIIAN HOLDINGS, INC.
Potential difficulties we may encounter as part of the integration process include the following: • the inability to successfully combine the Hawaiian Airlines business with that of Alaska's in a manner that permits us to achieve anticipated net synergies and other anticipated benefits of the acquisition; • successfully managing relationships with our combined customer base and retaining Hawaiian’s customers; • integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies; • managing Alaska Airlines and Hawaiian Airlines as two distinct brands, a strategy that has not been implemented in the U.S. commercial airline industry; • managing Hawaiian's international network successfully, which comprises multiple countries in which Air Group did not have prior experience; • diversion of the attention of our and Hawaiian's management and other key employees; • integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running a safe and efficient operation; • disruption of, or the loss of momentum in, our ongoing business; • liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the acquisition, including transition costs to integrate the two businesses that may exceed the costs that we currently anticipate; • maintaining productive and effective employee relationships and, in particular, successfully and promptly integrating seniority lists and achieving cost-competitive collective bargaining agreements that cover the combined union-represented work groups; • the increased scale of our operations resulting from the acquisition; • retaining key employees of our company and Hawaiian; and • obligations that we will have to counterparties of Hawaiian that arise as a result of the change in control of Hawaiian.
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business the size of Hawaiian, then we may not achieve the anticipated benefits of the acquisition of Hawaiian and our revenue, expenses, operating results and financial condition could be materially adversely affected.
We are expected to incur substantial expenses related to the acquisition and the integration of Hawaiian Airlines’ business.
We are expected to incur substantial integration and transition expenses in connection with the acquisition of Hawaiian Airlines, including the necessary costs associated with integrating the operations of Alaska and Hawaiian Airlines.
There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated, including reservations, loyalty program, ticketing/distribution, maintenance, and flight operations.
While we have assumed that a certain level of expenses will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses.
Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately.

and 13 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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