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Alaska Air Group, Inc. – ‘DEF 14A’ for 5/5/22

On:  Friday, 3/25/22, at 3:30pm ET   ·   For:  5/5/22   ·   Accession #:  1564590-22-11796   ·   File #:  1-08957

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/25/22  Alaska Air Group, Inc.            DEF 14A     5/05/22    1:5.1M                                   ActiveDisclosure/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Statement                          HTML   1.38M 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  ☒    Filed by a Party other than the Registrant  ☐

Check the appropriate box:

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

The Board of Directors of Alaska Air Group, Inc. (Air Group or the Company) is soliciting proxies for the 2022 Annual Meeting of Stockholders (the Annual Meeting).  This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting.  Please read it carefully.

The Board of Directors set Friday, March 11, 2022, as the record date for the Annual Meeting. This means that owners of Alaska Air Group common stock as of the close of business on that date are entitled to receive this notice, attend and vote during the Annual Meeting. There were 126,086,607 shares of Air Group common stock outstanding on the record date.

Internet Availability of Proxy Materials.  On or about March 25, 2022, stockholders of record, beneficial owners and employee participants in the Company’s 401(k) plans were mailed a Notice of Internet Availability of Proxy Materials (the Notice) directing them to www.proxyvote.com where they can access the Company’s 2022 Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2021 (the Annual Meeting Materials).  The Company’s 2021 Form 10-K was filed with the Securities and Exchange Commission (SEC) on February 11, 2022.  If you prefer to receive a paper copy of the proxy materials, please follow the instructions on the Notice and the Annual Meeting Materials will be mailed to you.

Attending the Annual Meeting.  We will host the Annual Meeting live via the webcast and telephone only.  Any stockholder can listen to and participate in the Annual Meeting.  Whether or not you attend the meeting, we encourage you to vote by Internet or phone or to complete, sign and mail your voting instruction form or proxy prior to the meeting.   

List of Stockholders.  A list of stockholders as of the record date for the Annual Meeting may be accessed during the Annual Meeting at www.virtualshareholdermeeting.com/alk2022 by using the control number on the Notice or on the proxy card or voting instruction form that accompanied your proxy materials.

Submit Your Questions.  We invite you to submit any questions of general stockholder interest to the Assistant Corporate Secretary via email at allie.wittenberger@alaskaair.com, or via the Shareholder Forum at www.proxyvote.com. You can submit questions in advance beginning on March 25, 2022. We will answer questions of general interest during the meeting as time permits. We will also include answers to your questions on www.alaskaair.com under About Alaska/Investor Relations following the meeting.  If you encounter issues accessing the website or the virtual meeting, please contact allie.wittenberger@alaskaair.com.

ALASKA AIR GROUP, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT

TABLE OF CONTENTS

TO OUR SHAREHOLDERS

Celebrating Alaska Airlines’ 90^th anniversary this year, we have reflected on the resilience and drive of all those who came before us and enabled our journey and incredible growth to this point. If you look at our DNA, you will find disciplined attention to costs, operational excellence, innovation, and the most caring employees in the industry. These qualities have helped us overcome challenging circumstances many times, and I have full confidence that we will continue to do so – and to capitalize on profitable growth in the next leg of our journey.

Delivering for everyone who depends on us is not only our past – it’s also our future.

Recovery from the pandemic has not been linear, but in 2021, Alaska’s business began to recover robustly as vaccine access expanded. Even as the emergence of new variants temporarily constrained bookings, we navigated the turbulence and established a track record of outperforming the industry.

That outperformance extends from our people to our financials. The care that makes Alaska Airlines and Horizon Air employees special are reflected in their actions to keep each other and our guests safe while still delivering exceptional service on the phone, at the airport, and on board. As we continue to recover in 2022, we’ll stay focused on guest safety, strong operations, and delivering genuine care to guests that make them feel at home when traveling with us.

Our financial performance significantly improved in 2021 over 2020, the first year of the pandemic and we ended 2021 at the top of the industry. As pandemic impacts remained, particularly the ups and downs of new variants, we lost $343 million in 2021 on a 70% recovery in revenue over 2019 levels. The third quarter was a significant turning point, as we recorded our first quarterly profit since the pandemic began and led the industry with a 12% adjusted pre-tax margin¹. We are proud that our adjusted pre-tax result topped the industry through the second half of 2021, illustrating that our disciplined return of capacity and focus on costs has been the right decision for our airlines. And we intend to deliver continued outperformance in 2022.

With regard to our balance sheet, we further fortified our position without diluting shareholders by issuing equity, differentiating ourselves from peers. In a period marked by increasing debt across our industry, we ended the year with adjusted net debt 40%² below 2019 levels, and a debt-to-cap ratio of 49%, placing us within our targeted leverage range. Our fortress balance sheet deepens our competitive advantage, allowing us to grow from a position of strength as the recovery continues.

We have learned in the last two years that we cannot anticipate every development in the world around us, but we can stay nimble in our response. So while uncertainties remain in Russia and Ukraine, fuel prices continue to soar, inflation pressures mount and the pandemic recovery continues, we are shifting our focus to executing our strategy for long-term outperformance and growth. At our Investor Day held in March this year, we laid out our plans for the next few years, including for significant growth where we see profitable opportunities. We also introduced our Owner’s Manual, our core business and financial management principles and long-term goals that guide us. The strategic decisions we executed over the past year – joining oneworld, establishing our West Coast International Alliance with American Airlines, and ramping up and expanding our transition to single fleets across both our mainline and regional operations – enhance our competitive advantages and set us up to continue producing sustained, profitable results.

With our aircraft order and pivot to growth in 2022 and beyond, we are focused on both sustainable growth from a financial standpoint, and our impacts on people and the climate. These new aircraft are significantly more fuel-efficient than those they replace, but we know we must do more to reflect our values and to continue creating an airline people love. That’s why in 2021 we announced short-term goals for efficiency and carbon-neutral growth, and a five-part path to reach net zero carbon emissions by 2040. Initial progress on these and other sustainability goals will be included in our 2021 ESG & Sustainability report.

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Finally, as part of a long-planned transition, our former CEO and current Board Chair, Brad Tilden, will step away from his current position after the Annual Meeting. We are thrilled to have Patricia Bedient as our new Board Chair. Patty is an 18-year board member for Alaska Air Group, with extensive financial and strategic expertise and deep understanding of our business and values. Patty will be Alaska Air Group’s first female Board Chair.

We’ve always believed that at its core, the airline business is a people business. We are here today because of our amazing employees, the loyalty of our guests and communities, and the confidence of our investors. We won’t waver in our commitment to each of you as our stakeholders, and we will remain nimble in executing our strategy to create long-term value while adapting to short-term changes in the environment.

Thank you for your support, and for your investment in Alaska Air Group.

Benito Minicucci

President and CEO, Alaska Air Group

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PROXY STATEMENT SUMMARY

Matters to be Voted On

Governance Highlights

As part of Air Group’s commitment to high ethical standards, our Board follows sound governance practices.  Many of these practices are described in more detail in our Corporate Governance Guidelines, which are available on the Company’s website at www.alaskaair.com under About Alaska/Investor Relations.

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Our Board

All nominees meet the New York Stock Exchange (NYSE) governance standards for director independence, except for Mr. Minicucci, who is not independent due to his position as an executive officer.

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Board Diversity and Skills Matrix

The Board recognizes that diversity brings unique perspectives, leads to more effective risk management and better alignment with guests, employees, and the communities in which the Company serves.  The Board’s nomination process, detailed in the Director Nomination Policy section below, has routinely resulted in the identification of candidates with diverse qualifications, backgrounds, geography, race, ethnicity, gender and age. Currently, 60% of board leadership positions are held by female and/or racially/ethnically diverse directors, including the non-executive Board Chair and Board committee chairs.

Independent Director Skills and Experiences

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Executive Compensation Practices

Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent and reward the achievement of key business goals.  The following practices ensure alignment of interests between stockholders and executives and are considered good governance by our Compensation and Leadership Development Committee (the Committee) and by the majority of our stockholders.

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Board Leadership

The Company’s board leadership generally includes a combined chair and CEO role with a strong independent lead director role. Notwithstanding the Board’s preference for combining the roles of chair and CEO, the Board may separate the CEO and chair roles from time to time, at its discretion, as it did in connection with Mr. Minicucci’s transition to CEO in 2021 and 2022.  

In deciding whether to separate the role of CEO, the Board considers, among other things, the experience and capacity of the sitting CEO, the rigor of independent director oversight of financial, operational and safety regulatory issues, the current climate of openness between management and the Board, and the existence of other checks and balances that help ensure independent thinking and decision making by directors.

As part of a years-long leadership succession plan, Brad Tilden, former CEO, who served as Executive Chairman since March 2021, will retire from the Board at the Annual Meeting. The Board has appointed Patricia Bedient to be the Company’s non-executive Board Chair, effective upon Mr. Tilden’s retirement.  Prior to transitioning to her role as Board Chair, Ms. Bedient served as our lead independent director since 2017.

The non-executive chair responsibilities include:

Executive Sessions

The Board holds executive sessions of independent directors quarterly, as provided in the Company’s Corporate Governance Guidelines. The lead independent director or non-executive Board Chair presides over these executive sessions. Each Committee also holds an executive session of independent directors quarterly (presided over in each case by the respective committee chair) and includes key management personnel on an individual basis in order to ensure full transparency and risk oversight.

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Risk Oversight

Air Group has adopted an enterprise-wide risk analysis and oversight program. This program is designed to:

The structure and reporting relationships and key areas of responsibility are shown below:

As shown above, responsibility for identified risks has been assigned to appropriate executives, and assignments have been aligned for appropriate board oversight. Responsibility for managing these risks includes strategies related to both mitigation (acceptance and management) and transfer (insurance).

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The risk matrix is approved annually by the Audit Committee and regularly reviewed by the Board.  The Audit Committee also receives quarterly updates regarding the program and an annual in-person review of the program’s status by the audit executive. Under the program, the Audit Committee also works with the audit executive and members of the management executive committee to annually identify the most pressing risk issues for the next year. This subset of the risk matrix is then used as a framework for periodic reports by the designated management executive to the appropriate board entity for heightened oversight. Furthermore, these areas of emphasis regarding risk are specifically reviewed and discussed with executive management annually and are incorporated into the development of the Company’s strategic objectives for the coming year.

The Company believes that its leadership structure, discussed in detail in the Board Leadership section in this Proxy Statement, supports the risk oversight function of the Board for the same reasons that it believes the leadership structure is most effective for the Company, namely that, while facilitating open discussion and communication from independent members of the Board, it ensures that strategic discussions are led by an individual with a deep understanding of the highly technical and complex nature of the airline business.

Director Orientation and Continuing Education

New directors participate in one-on-one introductory meetings with executive leaders and are given presentations on the Company’s strategic plans, financial statements, safety culture and other key issues. Directors are encouraged to enroll in continuing education programs on corporate governance and other critical issues associated with a director’s service on the Company’s board.  

Code of Conduct and Ethics

The Company has adopted the Code of Conduct and Ethics, which applies to all company employees, including its CEO, CFO, principal accounting officer and persons performing similar functions, and its Board of Directors. The Code of Conduct and Ethics may be found on the Company’s website at www.alaskaair.com under About Alaska/Investor Relations. Information on the Company’s website, however, does not form a part of this Proxy Statement. The Company discloses on the Company’s website any amendments (other than technical, administrative or non-substantive amendments) to, and any waivers from, a provision of the Code of Conduct and Ethics for directors or executive officers to the extent required by applicable NYSE listing standards and SEC rules.

Prohibition of Speculative Transactions in Company Securities

The Company’s insider trading policy prohibits the Company’s directors and executive officers, including the Named Executive Officers, as well as employees in the positions of managing director or above and certain other employees, from engaging in certain speculative transactions in the Company’s securities, including short-term trading, short sales, publicly traded options (such as puts, calls or other derivative securities), margin accounts, pledges of Company securities and certain forms of hedging or monetization transactions such as zero-cost collars and forward sale contracts.

Approach to Environmental, Social and Governance Matters (ESG) 

The Company’s purpose is “creating an airline people love” and its leaders believe that the best path to creating long-term value is to deliver for the Company’s four primary stakeholders -- employees, customers, shareholders, and communities. The Company believes its success depends on the ability to provide safe air transportation, develop relationships with guests by providing exceptional customer service and low fares, and maintain a low-cost structure to compete effectively. Leaders strive to achieve these objectives as a socially responsible company that values not only performance but also people, communities, and the environment. 

Air Group’s roots are in connecting rural Alaskan villages with essential services like food, medical supplies, and mail delivery – and those values are with us today.  We recognize there is much work needed to address

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impact on the globe, to expand opportunity equitably, and to ensure that all people are and truly feel safe, respected, and equal. 

The Company’s values are to Own Safety, Do the Right Thing, Be Kind-Hearted, Deliver Performance, and Be Remarkable. These guide our daily business, operations, governance, and stewardship of impact on the environment, people, and communities. ESG efforts are balanced across areas of greatest impact by our business, and the issues most important to our four primary stakeholder groups noted above. Amongst those, our highest priorities and those that will require focused effort are: (1) reducing carbon emissions and (2) advancing racial equity and opportunity inside the Company and across communities.  

 The four pillars that are woven throughout this work are the following: 

•we’re all about people, 

•we fly greener, 

•we invest for strong communities, and  

•we make flying matter. 

The Company was recently recognized among Barron’s 100 Most Sustainable Companies and brings an orientation of continuous learning and improvement to this work as in everything we do. 

ESG Governance and Oversight  

The Governance, Nominating and Corporate Responsibility Committee of the Board is responsible for overseeing the Company’s practices and reporting with respect to voluntary ESG goals and disclosure, annual reporting, and environmental and climate impacts.  The Governance, Nominating and Corporate Responsibility Committee includes members with deep experience in energy and environmental impact from multiple industries, as well as members with deep leadership experience in human capital, governance, safety and risk.

In addition to the annual reporting cycle, the Governance, Nominating and Corporate Responsibility Committee reviews a quarterly dashboard on progress to goals, and management commentary on milestones and trends. The Board has directed that sustainability and ESG be leading parts of the Company’s strategy and has regular discussions about this work including topics specific to climate impact and diversity, equity and inclusion. 

The Safety Committee receives regular updates on environmental risk, and the Compensation and Leadership Development Committee is responsible for oversight of human capital matters, including advancing diversity, equity, and inclusion such as through recruitment, hiring, retention, development, and culture building.   

At a management level, a member of our Executive Committee has formal responsibility for driving progress and disclosure in Sustainability and ESG. And because this work is inherently cross-functional, the Company has also formalized governance and oversight of ESG at the management level. An ESG Executive Steering Committee meets twice a quarter for oversight of performance and work toward the goals and is responsible for ensuring progress. Additional Steering Committees dedicated to Reducing Carbon Emissions and Advancing Racial Equity bring explicit focus in those two areas. Finally, a group dedicated to ESG Goals and Disclosure ensures appropriate stewardship and transparency in data to the breadth of ESG matters. These groups are staffed by senior executives across all areas of accountability for delivering on ESG – including operations, finance, human resources, legal, real estate, commercial divisions, government affairs and philanthropy.  

ESG Disclosure 

Air Group voluntarily reports progress annually on ESG goals. The 2020 report, including data per the Sustainability Accounting Standards Board (SASB) framework for aviation and an appendix addressing the Task Force for Climate Related Financial Disclosure (TCFD) framework, can be found by visiting: hCR_032921_2021-Lift-Report_Final-1.pdf (flysustainably.com). The Company’s 2021 report, to be published in the second quarter 2022, will report our progress against our 2025 goals.

Our 2025 goals and commitments were established with input from stakeholders across the Company and externally, and covers the areas of carbon, waste, water, racial equity, community involvement, labor practices, safety, crisis management, privacy and data security, and responsible political engagement. Additionally, the Company will keep financial management principles visible in this disclosure. The Company will present quarterly progress reports on these goals and commitments to the Board as described above, will report

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annually to the public, and will publicly report in accordance with leading reporting frameworks such as SASB, the Carbon Disclosure Project and Task Force on Climate Related Financial Disclosure.  

Climate Strategy 

Climate change is a threat to the future and is already impacting communities including those in which we operate, and extreme weather and temperature events impact our operations. The Company believes deeply in the transformational benefits of air travel to connect people with one another, help people understand one another, and enable communities to grow, thrive, create jobs and economic benefits. Air Group is committed to reducing our climate impact, with a principal focus on carbon emissions alongside broader focus on other climate impacts, waste, and water.  

The Company has committed to both short and long-term goals for reducing our climate impact. Our long-term goal is to achieve net zero carbon emissions by 2040, following a five-part strategy: (1) increasing the efficiency of our operations to avoid fuel use where we can, (2) renewing our fleet with the more fuel efficient Boeing 737MAX aircraft, (3) increasing use of sustainable aviation fuels, and (4) enabling innovative technology including future zero emissions propulsion alternatives. The fifth strategy, using high-quality carbon offsets, recognizes that there is not today enough technology or sustainable aviation fuel available to fully decarbonize aviation, and depending on the pace of innovation we may need offsets as a final strategy only as needed to close any gaps to target.

The company currently offtakes sustainable aviation fuel at San Francisco International Airport and is working with SkyNRG Americas to enable future SAF production from waste-based streams. Alongside oneworld alliance partners, we have committed to an objective of utilizing 10% SAF by 2030 as long as sufficient product is available and will continue to advocate for public policy to enable growth in commercially available supply.

Beginning in 2021, a carbon emissions target is part of the all-employee goals-based incentive pay program, and we beat our target.  This metric will remain in our performance-based pay program, underscoring a company-wide commitment to efficiency and sustainability.

Diversity, Equity, and Inclusion 

The Company values the importance of diversity, equity and inclusion in the workplace and believes that our airlines should be places where everyone feels they belong – employees and guests alike. We believe every person should be treated with respect regardless of race, ethnicity, capability, age, gender or sexual orientation and that guests should always feel welcome on board our aircraft. Employees deserve to feel safe and have a sense of belonging when they come to work. This means racism and discrimination have no place in our workplace or onboard our aircraft.  

The Company believes that aviation can enable opportunity. We are committed to advancing equity in all forms, with a current focus on racial equity. Building on feedback and input from employees, we set commitments and goals to advance racial equity through diverse leadership representation, an inclusive culture, and public leadership. Our focus is on creating opportunities for employment, engagement and advancement for diverse employees throughout the organization.  We are driving initiatives at all levels of the company to achieve these goals, including supporting education pipelines that create career pathways for diverse talent, and focusing on attracting and retaining diverse talent through leadership development and sponsorship programs. To underscore the accountability of leaders to make progress in these areas, beginning in 2021, a DEI metric was included in the performance-based segment of executives’ long-term incentive equity compensation. 

Community Involvement 

The Company is involved in the communities where we live and fly through corporate philanthropy, community engagement, employee volunteerism, and grants from the Alaska Airlines Foundation. A core area of focus, and the mission of the Alaska Airlines Foundation, is to inspire, equip, and enable young people to imagine and reach career opportunities, in aviation and beyond. In the last several years, this work is done through the lens of advancing racial equity.   

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The Company’s corporate philanthropy includes using our core asset of flight to transport people for school, to needed medical care, to respond to crisis and urgent needs, or to make a wish come true. This makes flying matter. Additionally, through Alaska’s LIFT Miles program, guests can contribute their miles to organizations that are aligned with their passions.    

2021 was a unique year for our community involvement, given the ongoing pandemic, but the Company turned to virtual engagement to reach young people with virtual aviation career panels; additionally, we engaged our employees as volunteers at vaccination sites and transported refugees to their new homes. The Company also launched the “Our Commitment” aircraft in partnership with UNCF. This aircraft serves as an embodiment of Alaska’s values and support for educational equity and is an extension of a 15-year partnership between Alaska and UNCF.   

Political Contributions and Engagement

Public policy affects our ability to achieve Company goals, meet customer needs and provide stockholder value. As such, the Company believes it is important to engage in public policymaking processes at the federal, state and local levels, which includes making political contributions where appropriate and permitted by law.

The Company is committed to adhering to the highest standards of ethics in engaging in activities that seek to advocate legislative positions that support our business and operations.  To ensure contributions are made in a manner consistent with the Company’s goals and stockholder’s interest, the Company has adopted a Policy on Political Contributions and Engagement. The Policy can be found at: https://investor.alaskaair.com/policy-political-contributions.

Policy Overview

In the Policy on Political Contributions and Engagement, the Company describes its interests in advocating for policies in support of its business and industry, including through, among other things, participating in trade associations and making political contributions where appropriate and permitted by the law.

The policy includes detailed procedures for making political contributions and expenditures, directly and indirectly, including with respect to candidates for public office, political parties, referenda and ballot initiatives. Among other things, the Company’s policy sets forth the following:

Dues and Contributions Disclosures

Through active links included in the Company’s Policy on Political Contributions and Engagement posted on the Company’s website (at the link referenced above), the Company discloses its direct and indirect political contributions through lobbying activities. The Company updates these disclosures semi-annually (generally, August and February of each year). Specifically, the Company discloses:

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The Company also provides through its website (at the link referenced above) links to the Company’s publicly available lobbying disclosures required to be submitted quarterly to the Secretary of the U.S. Senate and the Clerk of the U.S. House under the Lobbying Disclosure Act.

Process and Oversight

As detailed above, the Company’s Policy on Political Contributions and Engagement provides detailed information about the decision-making process for its political contribution and lobbying activity and the person(s) responsible. For example, as stated in the Company’s policy:

Stockholder Communications

Any stockholder or interested party who wishes to communicate with the Board or any specific director, including the non-executive Board Chair elect (who presides over executive sessions of the independent directors) or with the independent directors as a group, may write to:

Board of Directors

Alaska Air Group, Inc.

PO Box 68947

Seattle, WA 98168

Depending on the subject matter, management will:

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At each meeting of the Governance, Nominating and Corporate Responsibility Committee, the Corporate Secretary or Assistant Corporate Secretary presents a summary of all communications received since the last meeting of the Governance, Nominating and Corporate Responsibility Committee and will make those communications available to any director on request.

The Board has also implemented a protocol for stockholder-director engagement that provides long-term holders of a significant percentage of the Company’s stock a process for communicating directly with the Board in person or by phone.  Investors may request information regarding engagement with stockholders by contacting the Assistant Corporate Secretary at (206) 392-5380 or by email to allie.wittenberger@alaskaair.com.

Each year, the Company reaches out to stockholders that have requested such engagement or that have demonstrated a long-term, significant investment in the Company.  In the past year, the Company sought feedback from stockholders representing approximately 42% of the Company’s common stock on relevant matters related to corporate governance and stockholder value and the non-executive Board Chair elect and Chair of the Compensation and Leadership Development Committee met with every stockholder who expressed an interest in engaging.  The feedback from those discussions provided a framework for certain disclosures in this Proxy Statement.

Virtual Meeting Philosophy

The Company has held its annual meeting of stockholders as a virtual meeting since 2016.  The Company also offers stockholders the option to ask questions live via the chat feature. The Board believes that holding the annual meeting of stockholders in a virtual format provides the opportunity for participation by a broader group of stockholders, while reducing the costs associated with planning, holding and arranging logistics for in-person meeting proceedings. This balance allows the meetings to remain focused on matters directly relevant to the interests of stockholders in a way that recognizes the value to stockholders of an efficient use of Company resources.

The Board intends that the virtual meeting format provide stockholders a level of transparency as close as possible to the traditional in-person meeting format and takes the following steps to ensure such an experience:

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Proposal 1:  Election of Directors to One-Year Terms

The Company’s Bylaws provide that directors shall serve a one-year term. Directors are elected to hold office until their successors are elected and qualified, or until resignation or removal in the manner provided in the Company’s Bylaws. Thirteen directors are nominees for election this year and each has consented to serve a one-year term ending in May 2023.  There are no family relationships among the directors and our executive officers.

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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE

ELECTION OF THE 13 DIRECTOR NOMINEES NAMED ABOVE.

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Structure of the Board of Directors

In accordance with the Delaware General Corporation Law and the Company’s Certificate of Incorporation and Bylaws, the Company’s business affairs are managed under the direction of the Board of Directors. Directors meet their responsibilities by, among other things, participating in meetings of the Board and board committees on which they serve, discussing matters with the Board Chair, CEO and other executives, reviewing materials provided to them, and visiting the Company’s facilities.

Pursuant to the Bylaws, the Board of Directors has established five standing committees, which are the Audit Committee, the Compensation and Leadership Development Committee, the Governance, Nominating and Corporate Responsibility Committee, the Safety Committee and the Innovation Committee. Only independent directors serve on these committees. The Board has adopted a written charter for each committee, which they review annually and update as necessary. These charters are posted on and can be accessed at www.alaskaair.com under About Alaska/Investor Relations.

The table below shows the current members and chairs of the standing board committees.

Board Committee Memberships

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Board Committee Functions

The principal functions of the standing board committees, pursuant to their respective charters, are as follows:

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Board and Committee Meetings

In 2021, the Board of Directors held 5 meetings. The standing board committees held the following number of meetings in 2021:

Audit Committee – 4

Compensation and Leadership Development Committee – 6

Governance, Nominating and Corporate Responsibility Committee – 4

Safety Committee – 4

Innovation Committee -- 4

Each director attended at least 75% of all board and applicable committee meetings during 2021. Each director is expected to attend the Company’s Annual Meeting of Stockholders. Last year, all directors attended the annual stockholders meeting.

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Director Independence

The Board of Directors of the Company has determined that all non-employee directors (Mses. Bedient, Hogan, Li, Lofton and Sandvik and Messrs. Beer, Conner, Elwell, Fonseca, Knight, Jr., Thompson and Yeaman), and including each member of the Audit Committee, Compensation and Leadership Development Committee, Governance, Nominating and Corporate Responsibility Committee, Safety Committee and Innovation Committee are independent under the NYSE listing standards and the Company’s independent director standards that are set forth in the Company’s Corporate Governance Guidelines.  Mr. Minicucci is not independent due to his position as our CEO.  In addition, the Board of Directors previously determined that Marion Blakey, who served on the Board of Directors until her resignation in May 2021, was independent during the period of her service on the Board in 2021. The Corporate Governance Guidelines are available on the Company’s website at www.alaskaair.com under About Alaska/Investor Relations.  In making its determination, the Board considered any transactions or relationships between the director, members of his or her family and organizations with which that director or family members have an affiliation, on the one hand, and us, our subsidiaries and management, on the other hand. In this regard, the Board considered the value of charitable contributions made by the Company to an organization with which Ms. Bedient is affiliated in a non-fiduciary capacity as a member of its advisory board. After consideration of these matters and in accordance with the Board’s independent director criteria, the Board affirmatively determined that the matters did not represent material relationships with the Company because the amounts of the contributions were immaterial with respect to the Company’s and the outside organization’s annual revenues.

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Specifically, the Board has determined that independent directors must have no material relationship with the Company, based on all material facts and circumstances. At a minimum, an independent director must meet each of the standards listed below.

For the purposes of these standards, “Company” includes all Alaska Air Group subsidiaries and other affiliates. “Immediate family member” includes the director’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and anyone sharing the director’s home.

The independence standards for the members of the Audit Committee provide that, in addition to the foregoing standards, they may not receive any compensation other than director’s fees for board and audit committee service and permitted retirement pay, or be an “affiliate” of the Company apart from their capacity as a member of the Board as defined by applicable SEC rules. Each member of the Company’s Audit Committee meets the additional independence, financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE relating to audit committees or as required by the SEC. The Board has determined that Ms. Bedient and Mr. Yeaman are audit committee financial experts as defined in SEC rules.

The independence standards for members of the Compensation and Leadership Development Committee provide that, in addition to the foregoing standards that apply to directors generally, the Board must consider all factors specifically relevant to determining whether a director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a member of the Compensation and Leadership Development Committee, including the source of compensation of such director and whether such director is affiliated with the Company or any of its subsidiaries or affiliates. Each member of the Company’s Compensation and Leadership Development Committee meets this additional independence requirement in the corporate governance listing standards of the NYSE related to compensation committees.

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Director Nomination Policy

Identification of Candidates

The Governance, Nominating and Corporate Responsibility Committee (referred to in this section as the Nominating Committee) has two primary methods for identifying candidates (other than those proposed by the Company’s stockholders, as discussed below):

This process has routinely resulted in the identification of candidates with diverse qualifications, backgrounds, geography, ethnicity, gender and age who have been re-elected by the majority of stockholders each year.

Stockholders who meet the qualifications outlined below may nominate up to two director candidates for inclusion in the Company’s proxy statement (see Proxy Access Right of Stockholders below). Stockholders who do not meet those qualifications or do not wish to have their director nominees included in the Company’s proxy materials may nominate director candidates and file their own proxy statement to solicit proxies for the election of their director nominees at an annual meeting if they comply with the requirements outlined in the Company’s Bylaws and as generally described below under General Nomination Right of All Stockholders.  For more information, see How can I submit a proposal for next year’s annual meeting? in the Questions and Answers section of this Proxy Statement including the deadlines applicable to the submission of director nominations for next year’s annual meeting of stockholders.  

Stockholders who wish to propose director candidates for board consideration may do so according to the process outlined in this section under Consideration of Director Candidates Recommended by Stockholders.  

The Corporate Secretary will send a copy of the Company’s Bylaws to any interested stockholder upon request. The Company’s Bylaws are also available on the Company’s website at www.alaskaair.com under About Alaska/Investor Relations.

In December 2015, the Board amended the Company’s Bylaws to provide a “proxy access” right to stockholders.  The Company’s proxy access bylaw is consistent with the prevailing market practice and satisfies the majority of stockholders. Under this proxy access right, a stockholder or a group of up to 20 stockholders owning at least 3% of the Company’s shares continuously for three years may nominate directors constituting up to 20% of the Board, or two nominees, whichever is greater, for election as a director of the Company at an annual meeting of stockholders and inclusion in the Company’s proxy materials.  This right is subject to certain conditions, including complying with the notice, information and consent provisions contained in Article II, Section 10 of the Company’s Bylaws.  The provisions generally require that written notice of a stockholder’s nomination of one or more persons for election to the Board and inclusion in the Company’s proxy materials be received by the Corporate Secretary of the Company no later than the close of business on the 120^th day, and no earlier than the close of business on the 150^th day, prior to the first anniversary of the date the Company’s proxy statement was released to stockholders for the previous year’s annual meeting.  Other specifics regarding the foregoing proxy access right, including the required content of the notice and certain other eligibility and procedural requirements, are set forth in Article II, Section 10 of the Company’s Bylaws.

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Any stockholder of the Company may nominate one or more persons for election as a director of the Company at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in Article II, Section 9 of the Company’s Bylaws. The provisions generally require that written notice of a stockholder’s intent to make a nomination for the election of directors be received by the Corporate Secretary of the Company no later than the close of business on the 90^th day, and no earlier than the close of business on the 120^th day, prior to the first anniversary of the prior year’s annual meeting. The written notice submitted by a stockholder must also satisfy the additional informational requirements set forth in Article II, Section 9 of the Bylaws

The Nominating Committee will evaluate candidates recommended by a single stockholder, or group of stockholders, that have beneficially owned more than 5% of the Company’s outstanding common stock for at least one year and that satisfies the notice, information and consent provisions set forth below (such individual or group is referred to as the Qualified Stockholder).

The Nominating Committee will evaluate candidates recommended by Qualified Stockholders in accordance with the procedures described below.

Qualified Stockholders may propose a candidate for evaluation by the Nominating Committee by delivering a written notice to the Nominating Committee satisfying each of the requirements described below (the Notice). The Notice must be received by the Nominating Committee not less than 120 calendar days before the anniversary of the date that the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting.  No such notice was received in connection with the Annual Meeting.

Any candidate recommended by a Qualified Stockholder must be independent of the Qualified Stockholder in all respects (i.e., free of any material relationship of a personal, professional, financial or business nature from the nominating stockholder), as determined by the Nominating Committee or by applicable law. Any candidate submitted by a Qualified Stockholder must also meet the definition of an “independent director” under applicable NYSE rules. The Notice shall also contain or be accompanied by the information or documentation described below.

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The Notice shall be delivered in writing by registered or certified first-class mail, postage prepaid, to the following address:

Board of Directors

Alaska Air Group, Inc.

PO Box 68947

Seattle, WA 98168

The Corporate Secretary will promptly forward the Notice to the Board Chair and to the Chair of the Nominating Committee.

If, based on the Committee’s initial screening of a candidate recommended by a Qualified Stockholder, a candidate continues to be of interest to the Nominating Committee, the Chair of the Committee will request that the CEO interview the candidate, and the candidate will be interviewed by one or more of the other Committee members. If the results of these interviews are favorable, the candidate recommended by a Qualified Stockholder will be evaluated as set forth below. Except as may be required by applicable law, rule or regulation, the Nominating Committee will have no obligation to discuss the outcome of the evaluation process or the reasons for the Nominating Committee’s recommendations with any Qualified Stockholder who made a director candidate recommendation.

The Nominating Committee’s policy on the evaluation of candidates recommended by stockholders who are not Qualified Stockholders is to evaluate such recommendations, and establish procedures for such evaluations, on a case-by-case basis. This policy allows the Nominating Committee to devote an appropriate amount of its own and the Company’s resources to each such recommendation, depending on the nature of the recommendation itself and any supporting materials provided. All candidates (whether identified internally or by a stockholder) who, after evaluation, are then recommended by the Nominating Committee and approved by the Board, will be included in the Company’s recommended slate of director nominees in its proxy statement.

Evaluation of Candidates

As to each recommended candidate that the Nominating Committee believes merits consideration, the Nominating Committee will cause to be assembled information concerning the background, qualifications and appropriate references of the candidate, including information concerning the candidate required to be disclosed in the Company’s proxy statement under the rules of the SEC and any relationship between the candidate and the person or persons recommending the candidate. The Nominating Committee will then (i) determine if the candidate satisfies the qualifications set forth under Policy on Minimum Qualifications for All Directors below; (ii) conduct interviews with the candidate as it deems necessary and appropriate; and (iii) consider the contribution that the candidate can be expected to make to the overall functioning of the Board. The Nominating Committee will then meet to consider and finalize its list of recommended candidates for the Board’s consideration.

The Nominating Committee will consider incumbent candidates based on the same criteria used for candidates recommended by Qualified Stockholders, provided that incumbents will also be considered on the basis of the Nominating Committee’s annual evaluations of the effectiveness of the Board, its committees and their members.

Policy on Minimum Qualifications for All Directors

While there is no formal list of qualifications, the Nominating Committee considers, among other things, the prospective nominee’s relevant experience, intelligence, independence, commitment, ability to work with the CEO and within the Board culture, prominence, diversity, and age. The Nominating Committee may also consider a nominee’s CEO experience, senior-level international experience, senior-level regulatory or legal experience, and relevant senior-level expertise in one or more of the following areas: finance, accounting, sales and marketing, safety, organizational development, information technology, digital marketing, and government

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and public relations. Different substantive areas may assume greater or lesser significance at particular times, in light of the Board’s present composition and the Nominating Committee’s (or the Board’s) perceptions about future issues and needs.

For a candidate to serve as an independent director, an independent and questioning mindset is critical. The Nominating Committee also considers a prospective candidate’s workload and whether he or she would be able to attend the vast majority of Board meetings, be willing and available to serve on Board committees, and be able to devote the additional time and effort necessary to keep up with Board matters and the rapidly changing environment in which the Company operates.

Board diversity is considered broadly, not merely with regard to race, gender, or national origin, but also with regard to general background, geographical location, and other factors. The consideration of diversity permeates all discussions at the Nominating Committee. In addition, on an annual basis, as part of the Board’s self-evaluation, the Board assesses whether the mix and diversity of board members is appropriate for the Company.

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Certain Relationships and Related Person Transactions

Policies and Procedures for Approval of Related Person Transactions

The Board of Directors has adopted a written policy for review, approval or ratification of any transaction, arrangement or relationship in which the Company was, is or will be a participant, the aggregate amount involved exceeds $120,000 in any calendar year, and a related person has or will have a direct or indirect material interest (other than solely as a result of being a director or the beneficial owner of less than 10% of another entity). For purposes of the policy, a related person is any person who is, or at any time since the beginning of the last fiscal year was, (i) one of the directors or executive officers or a nominee to become a director, or (ii) any beneficial owner of more than 5% of the Company’s common stock, or any immediate family member of any of these persons.

Under the policy, once such a transaction by a related person has been identified, the Audit Committee (or, for transactions that involve less than $1 million in the aggregate, the chair of the Audit Committee) must review the transaction for approval or ratification. Members of the Audit Committee or the chair of the Audit Committee, as applicable, will review all relevant facts regarding the transaction in determining whether to approve or ratify it, including the extent of the related person’s interest in the transaction, whether the terms are comparable to those generally available in arm’s-length transactions, and whether the transaction is consistent with the best interests of the Company. The related person involved in the transaction will not participate in the approval or ratification process except to provide additional information as requested for the review. Once initially approved or ratified, all transactions with related persons will be reviewed at least annually.

The policy does not require review or approval of the following transactions: employment by the Company of an executive officer unless he or she is an immediate family member of another related person; any compensation paid by the Company to a director; and a transaction in which a related person’s interest arises solely from the ownership of equity securities and all holders of the securities receive the same benefit on a pro-rata basis.

Certain Transactions with Related Persons

The Company and its subsidiaries have transactions in the ordinary course of business with other corporations of which the Company’s executive officers or directors or members of their immediate families are directors, executive officers, or stockholders. The amounts involved in these transactions are below the disclosure thresholds set by the SEC, or the executive officer or director or his or her family member does not have a direct or indirect material interest, as that term is used in SEC rules, in the transaction. Since January 1, 2021, the Company has not participated in, nor is there currently planned, any transactions required to be disclosed pursuant to SEC Regulation S-K Item 404(a).

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2021 Director Compensation

The following table presents information regarding the compensation paid for 2021 to members of the Board of Directors who were not also the Company’s employees (non-employee directors). The compensation paid to Mr. Tilden and Mr. Minicucci for 2021 is presented in the Summary Compensation Table and the related explanatory tables. Mr. Tilden and Mr. Minicucci did not receive additional compensation for their service as directors.

In May 2021, Mr. Beer, Ms. Hogan, Mr. Knight, Ms. Li and Ms. Sandvik were each granted 1,566 deferred stock units (DSUs), based on their 2020 elections to defer their 2021 stock retainers. Ms. Bedient, Mr. Conner, Mr. Elwell, Mr. Fonseca, Mr. Thompson, and Mr. Yeaman were each issued 1,566 shares of Alaska Air Group common stock. Mr. Elwell was issued a prorated stock retainer of 525 common shares upon his appointment to the Board in January 2021.  Ms. Lofton was issued a prorated stock retainer of 1,025 common shares upon her appointment to the Board in October 2021.  See discussion of these awards in Note 12 (Stock-Based Compensation Plans) to the Company’s Consolidated Financial Statements included as part of the Company’s 2021 Annual Report filed on Form 10-K with the SEC and incorporated herein by reference.

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Director Stock Ownership Policy

The Company expects directors to act in the Company’s best interests regardless of the number of shares they own. Each non-employee director is expected to hold shares of Company stock having a value equal to at least six times the director’s annual cash retainer, such ownership to be achieved within six years of joining the Board. Deferred stock units held by directors, which are 100% vested at grant, will count toward the holding requirement even though they will not be issued until the director resigns from the Board.

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Proposal 2:  Approval (on an Advisory Basis) of the Compensation

of the Company’s Named Executive Officers

The Company is providing its stockholders with the opportunity to cast a non-binding, advisory vote on the compensation of the Company’s Named Executive Officers (NEOs) as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including the compensation tables and the narrative discussion accompanying those tables as well as in the Compensation Discussion and Analysis).

As described more fully in the Compensation Discussion and Analysis (CD&A) section of this Proxy Statement, the structure of the Company’s executive compensation program is designed to compensate executives appropriately and competitively and to drive superior performance. For the NEOs, who are primarily responsible for the overall execution of the Company’s strategy, a high percentage of total direct compensation (meaning base salary, actual short-term incentive pay plus the grant date fair value of equity awards as determined for accounting purposes) is variable and tied to the success of the Company. The Company’s strategic goals are reflected in our incentive-based executive compensation programs so that the interests of executives are aligned with stockholder interests. Executive compensation is further structured to be internally equitable, to reward executives for responding successfully to business challenges facing the Company, and to drive high performance, and to take into consideration the Company’s size relative to the rest of the industry.  

The CD&A section of this Proxy Statement describes in more detail the Company’s executive compensation programs and the decisions made by the Compensation and Leadership Development Committee (referred to in this section as the Committee) during 2021. We also discuss the impacts on compensation as a result of the Company taking measures it determined were necessary to preserve the financial stability of the Company for shareholders, employees and the communities during the COVID-19 pandemic.

Our 2021 executive compensation program includes three core elements:

Base Salary

In February 2021, the Committee set base salary for Mr. Minicucci at or about the 25^th percentile of the airline peer group identified in the CD&A in connection with his appointment to CEO effective March 31, 2021.  The Committee set base salaries for the other NEOs at or about the 50^th percentile of corresponding positions in the same peer group.

Annual Incentive Pay

The NEOs are eligible to earn annual incentive pay under our Performance Based Pay (PBP) Plan, in which all employees participate with the same performance goals.  The PBP Plan is intended to motivate all participants to achieve specified Company goals.  For 2021, the plan focused on five key areas: protecting the personal health and safety of our employees and guests through the COVID-19 pandemic, generating positive cash flow from our operations, running a highly efficient and productive airline, reducing our carbon emissions and returning to profitability.

Refer to the CD&A for more detailed information on the structure and payout of the PBP.

Long-term Incentive Pay

Equity-based incentive awards that link executive pay to stockholder value generation are an important element of the Company’s executive compensation program and comprise the largest portion of pay for our NEOs. Long-term equity incentives that vest over three- or four-year periods are awarded annually, including performance stock units (PSUs), stock options and restricted stock units (RSUs).  Consistent with the equity mix granted in prior years, the NEOs’ 2021 equity grant was allocated approximately 50% to PSUs and

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approximately 25% to each of stock options and RSUs (based on the grant date fair value of the awards). The Committee typically grants equity awards annually which results in overlapping vesting periods that discourage short-term risk taking and align NEOs long-term interests with those of stockholders while helping the Company attract and retain top-performing executives who fit a team-oriented and performance-driven culture.

In general, the Committee sets target annual incentive pay and annual equity grants at levels intended to provide executives an opportunity to achieve total direct compensation at the 50^th percentile of the target total direct compensation for comparable positions with the peer companies if the annual and long-term incentive targets are reached, and to surpass the 50^th percentile if those targets are exceeded.

Annual Advisory Say-on-Pay Proposal

In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, the Board of Directors will request your advisory vote on the following resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Named Executive Officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.

This proposal regarding the compensation paid to the NEOs is advisory only and will not be binding on the Company or the Board, nor will it be construed as overruling a decision by the Company or the Board or as creating or implying any additional fiduciary duty for the Company or the Board. However, the Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for the Named Executive Officers. Consistent with the results of an advisory vote at the Company’s 2017 annual meeting concerning the frequency of the advisory vote regarding the compensation paid to the NEOs, stockholders are given an opportunity to cast an advisory vote on NEOs annually, with the next opportunity expected to be in connection with the Company’s annual meeting in 2023.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL (ON AN ADVISORY BASIS) OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE SEC’S EXECUTIVE COMPENSATION DISCLOSURE RULES.

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Compensation Discussion and Analysis

This CD&A contains a discussion of the material elements of compensation earned by, or awarded to our named executive officers (NEOs) during 2021:

Benito Minicucci, chief executive officer (CEO) and president of Alaska Air Group and Alaska Airlines since March 31, 2021, previously president of Alaska Airlines;

Shane R. Tackett, executive vice president finance and chief financial officer (CFO) of Alaska Air Group and Alaska Airlines;

Andrew R. Harrison, executive vice president and chief commercial officer (CCO) of Alaska Airlines;

Constance E. von Muehlen, executive vice president and chief operating officer (COO) of Alaska Airlines since April 3, 2021;

Andrea L. Schneider, senior vice president of people of Alaska Airlines; and  

Bradley D. Tilden, executive chairman of the board, former CEO and president of Alaska Air Group, succeeded by Mr. Minicucci on March 31, 2021.

Consideration of Say-on-Pay Advisory Vote

Stockholders have an opportunity annually to cast an advisory vote in connection with our executive compensation program.  At the 2021 annual meeting, 93% of the votes were cast in favor of the advisory say-on-pay proposal in connection with the Company’s 2020 compensation. The Committee believes that this voting result indicates that stockholders approve of the structure of executive compensation at Alaska Air Group.  

Overview

The airline industry was especially hard hit by the pandemic, and recovery has been slow and volatile.  A strong, engaged executive leadership team was crucial to the Company’s ability to respond effectively to these new challenges and will remain critical as we position the Company for future success.  Although our compensation philosophy remains conservative and focused on shareholder value creation, the Committee recognizes and takes into account several other dynamics that influence our executive compensation program.  

Financial support under the U.S. Coronavirus Aid, Recovery and Economic Support (CARES) Act was welcomed relief.  As a condition of the CARES Act, executive compensation has capped our leaders at 2019 compensation levels until April 1, 2023.  These limitations prevent the Company from fully rewarding executives for our relative out-performance of our peers amidst the challenges of 2021 and from recognizing promotions or increased job scope.  We highlight these impacts below.  It is our goal to engage high-performing executives and secure their leadership for the duration of the CARES Act restrictions. We operate in a highly competitive executive labor market on the West Coast where we must compete with companies outside of the commercial industry.

Environment, Social and Governance (ESG) initiatives play a prominent role in our compensation programs, with our broad-based short-term incentive pay plan including carbon emission reduction goals for the second year.  Our performance stock unit awards include a diversity, equity and inclusion metric that incentivizes executives to advance these goals.  

Philosophy and Objectives of the Company’s Executive Compensation Program

The philosophy of the Company’s executive compensation program in 2021 was consistent with that of prior years: to be conservative stewards of stockholder resources while compensating executives appropriately and competitively and driving superior performance relative to other airlines in North America.  Because the NEOs are primarily responsible for the overall execution of the Company’s strategy, a high percentage of their total direct compensation, 86% for the CEO and 80% for the other NEOs, is variable and tied to Company performance, thereby providing incentives to achieve goals to help create value for stockholders.

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The fundamental objectives of the executive compensation program are:

2021 Business Highlights

Our full year 2021 results reflect a disciplined focus on cost management and a measured approach to bringing back capacity in recovery. In addition to delivering profitability in the second half of the year, Alaska's financial performance enabled the company to restore its debt-to-capitalization ratio to pre-pandemic levels in the fourth quarter, priming the airlines for profitable growth in 2022.

Financial Results:

Operational Updates and Milestones:

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ESG Updates:

2021 Executive Transitions and Compensation Actions:

Mr. Minicucci assumed the role of CEO and president of Alaska Air Group upon Mr. Tilden’s retirement on March 31, 2021 and Ms. von Muehlen assumed the role of executive vice president and COO of Alaska Airlines on April 3, 2021.

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To implement the executive compensation program for 2021, the Committee took the following steps in February 2021:

Consistent with the equity mix granted in prior years, 50% of the total award value was in PSUs, 25% in stock options and 25% in RSUs.  As discussed in the 2020 proxy, due to the unprecedented financial impacts of COVID-19, unvested PSU awards granted in 2018, 2019 and 2020 that were based on achievement of certain return-on-invested-capital (ROIC) targets were deemed unlikely to vest and therefore reduced to $0 value in accordance with GAAP.  Due to the continued financial impacts of the pandemic, the Committee reevaluated the performance metrics for the PSUs granted in 2021 to put more emphasis on relative TSR performance versus airline peers and introduced ESG metrics.  The PSUs have a three-year performance period and, for the 2021 grants, 80% of the award vests based on the Company’s TSR relative to an airline industry peer group (identified below under Long-Term Equity-Based Incentive Compensation) and 20% based on achievement of racial equity goals at the senior leadership level.  We believe these awards align executives’ incentives with the creation of long-term value for stockholders.

On February 11, 2022, Mr. Tilden announced his decision to retire as chairman of the board effective after the Annual Meeting on May 5, 2022. He will be succeeded by Ms. Bedient who will serve as a non-executive Board Chair.

COVID-19 and CARES Act Impacts

When the pandemic began in 2020, the Committee took immediate steps to aid the Company’s cash preservation goals by rescinding Board, CEO and other executive compensation increases and further reducing base pay for up to six months for some executives. Alaska Airlines and Horizon Air received government aid and loan under the CARES Act.  Due to the continued focus on cost control and cash preservation, the Company repaid the CARES Act loan in full on June 3, 2021.  

The CARES Act disallows the Company from paying most of its executives more than their 2019 compensation, regardless of changes to their responsibility or job scope, through April 1, 2023. The pandemic disproportionately affected the airline industry and, while federal government relief in the form of payroll support grants and loans was a critical and appreciated source of support, the CARES Act restrictions have prevented the Company from offering increased compensation to reward the executives charged with leading the Company through an unprecedented crisis and returning it to profitability and long-term success. In order to comply with the CARES Act restrictions, the Company has had to clawback equity awards from many of these same executives in 2020, 2021 and 2022 because the grant date value of these awards, together with the executive’s other compensation, has exceeded the executives 2019 compensation cap.

By capping executive compensation at 2019 levels regardless of other circumstances, the CARES Act has prevented the Committee from recognizing the heightened responsibilities of the named executive officers who were promoted during or just before the pandemic emerged.  Since 2020 most of the named executive officers

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have been performing larger, more responsible jobs, but at compensation levels associated with their prior roles. For example:

For illustrative purposes, a reconciliation of the Total Compensation from the Summary Compensation Table to the value received after the clawback of equity granted is presented below.

Impact of Equity Award Clawbacks in 2021

In an intensely competitive market for top talent, the Committee is closely focused on keeping executives engaged and confident in the value proposition of remaining employed with the Company for the duration of the CARES Act restrictions and beyond.

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The Committee has recognized that the leadership team continues to demonstrate strength and resilience throughout the crisis, which ultimately translates to preserving shareholder value. In consultation with its independent advisors, the Committee intends to make it a priority to determine the best method to address executives’ lost compensation when the CARES Act restrictions are lifted.

Compensation Setting Philosophy

In 2021, the Committee continued to target the CEO’s base salary at or about the 25^th percentile of the CEOs of the Company’s airline peer group identified below. The Committee may decide to set the CEO’s salary above or below the 25^th percentile after considering other relevant factors. The CEO’s compensation arrangements are generally structured so that he or she has the opportunity to earn total direct compensation up to approximately the 50^th percentile of the target total direct compensation of peer companies’ chief executive officers if the applicable annual and long-term incentive targets are reached, and to surpass the 50^th percentile if those targets are exceeded.  

For the other NEOs, the Committee generally targets base salary at or about the 50^th percentile of base salaries for comparable positions with the airline peers and provides executives an opportunity to achieve total direct compensation at the 50^th percentile of the target total direct compensation for comparable positions with the peer companies if annual and long-term incentive targets are reached, and to surpass the 50^th percentile if those targets are exceeded.

While the Committee generally sets executive pay at the levels indicated above, it may also consider other factors, such as Company performance, individual performance, tenure, retention goals, succession considerations, and internal equity, in determining the compensation levels for executives from year to year.

How Executive Compensation is Determined

The Committee’s Role. The Committee determines and approves the compensation of NEOs, taking into account the CEO’s recommendations for all NEOs excluding himself.  The Committee determines the CEO’s compensation with the assistance of its independent compensation consultant.

Independent Consultants. The Committee has retained Meridian Compensation Partners, LLC (Meridian) to assist the Committee with its responsibilities related to the Company’s executive and board of directors’ compensation programs. The Committee considered the following facts in assessing Meridian’s independence as an advisor:

Based on its review, the Committee has determined that no conflicts of interest exist between the Company and Meridian (or any individuals working on the Company’s account on Meridian’s behalf).

How the Elements of the Company’s Executive Compensation Program Were Selected

The Committee conducts periodic reviews of the Company’s executive compensation program to assess its alignment with the Committee’s objectives. The Committee considers how each component of compensation

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motivates executives to help the Company achieve its performance goals and execute its strategic plan and how it promotes retention of executives who share the Company’s values. The compensation structure is designed to promote initiative, resourcefulness, sustainability, diversity, equity and inclusion and teamwork by key employees whose performance and responsibilities directly affect the performance of the business. The Committee uses both fixed compensation (i.e. base salary) and variable performance-based compensation to achieve a program that we believe is balanced, competitive and provides appropriate incentives. Base salaries, benefits, perquisites, retirement benefits, and change-in-control benefits are intended to attract and retain highly qualified executives and, in the case of salary and benefits, are generally paid out on a short-term or current basis. Annual incentives and long-term equity-based incentives are intended to motivate executives to achieve specific performance objectives.

The Committee believes that this mix of short-term and long-term compensation allows it to achieve dual goals of attracting and retaining highly qualified executives and providing meaningful performance incentives for those executives.

Deterrents to Excessive Risk-Taking

The Committee believes it has designed the overall compensation program in such a way as to deter excessive risk-taking, to encourage executives to focus on the long-term success of the Company and to align the interests of executives with those of stockholders by:

The Company does not believe that its compensation programs encourage unnecessary risk-taking that could have a material adverse effect on the Company as a whole.

Executive Pay Mix and the Emphasis on Variable Pay

The Committee believes that emphasis on variable, performance-based compensation for the NEOs is a key element in achieving a pay-for-performance culture and in aligning management’s interests with those of the Company’s stockholders. At the same time, the Committee believes that the executive compensation program provides meaningful incentives for executives while balancing risk and reward.

Total direct compensation for the Company’s NEOs is tailored to place a substantial emphasis on variable pay, that is, pay linked to the achievement of specific, measurable performance objectives and subject to variation depending on the degree to which such objectives are achieved. For 2021, the Committee approved target-level total direct compensation for Mr. Minicucci that is 86% performance-based and/or tied to stockholder value creation. With respect to the other NEOs, the Committee approved target total direct compensation that

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is on average 80% performance-based upon the achievement of operational and financial performance measures.

Total Direct Compensation

The Use of Benchmarking Against a Peer Group

The Committee reviews and analyzes total direct compensation for the NEOs annually against the compensation provided by a peer group of airline companies to executives in similar positions. In analyzing the information for 2021, the Committee reviewed the target total direct compensation for executives of a peer group of airlines as identified below.

The following companies represent the airline peer group selected by the Committee as a comparator for determining appropriate compensation levels for 2021 (the same peer group as used to evaluate 2020 compensation):