We will announce preliminary voting results at the meeting. We also will publish the final results in our quarterly report on Form 10-Q for the second quarter of 2002.2003. You can getread or print a copy of that report by going to the Company’s website, www.alaskaair.com, and then

9

choosing Company Information, Investor Information, and Securities and Exchange Commission Filings. You can find the same Form 10-Q by going directly to the SEC EDGAR files atwww.sec.gov. You can also get a copy by calling us at (206) 431-5567, or by calling the Securities and Exchange CommissionSEC at (800) SEC-0330 for the location of a public reference room, or through the EDGAR system at http://www.sec.gov on the Internet.room.

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[SIDEBAR]
Election of Directors

•		Phyllis J. Campbell
•		Mark R. Hamilton
•		Byron I. Mallott
•		Richard A. Wien

PROPOSALS TO BE VOTED ON

PROPOSAL NO. 1
1.  ELECTION OF DIRECTORS

The Company currently has twelvethirteen directors.

HOW MANY DIRECTORS ARE NOMINATED EACH YEAR? Mrs. Mary Jane Fate and Mr. John F. Kelly are retiring from the Board after this meeting. The Board of Directors has adopted a resolution, as provided by the Certificate of Incorporation, reducing the number of directors to eleven, effective on completion of the annual meeting.

The directors are divided into three classes so that approximately one-third of the directors are elected each year for three-year terms. Directors are elected to hold office until their successors are elected and qualified, or until resignation or removal in the manner provided in our bylaws. FourBylaws. Three directors are nominees for election this year.year and each has consented to serve a three-year term ending in 2006. The remaining directors will continue to serve the terms described in their biographies.set out below.

WHO ARE THE NOMINEES?NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2006

Nominees for election this year are Mrs. Phyllis J. Campbell, Mr. Mark R. Hamilton, Mr. Byron I. Mallott and Mr. Richard A. Wien. Each nominee is presently a director of the Company and has consented to serve a three-year term ending in 2005.

The Board of Directors recommends a voteforelection of each of the director nominees.

PHYLLIS J. CAMPBELL

Mrs. Campbell, age 50, was appointed a director on January 30, 2002. She was President of U.S. Bank of Washington until May 2001 and currently serves as Chair of the bank’s Community Board. She also serves on the boards of SAFECO, Puget Energy, and the Pacific Science Center, and is a member of the Board of Regents of Washington State University.

MARK R. HAMILTON

Mr. Hamilton, Age 57, was appointed a director in April 2001 and serves on the Company’s Audit and Safety Committees. He has served as President of the University of Alaska since 1998. That same year, he retired as a U.S. Army Major General following 31 years of active military duty, primarily in the fields of teaching, management and administration. Formerly, Mr. Hamilton was Chief of Staff of the Alaskan Command at Elmendorf Air Force Base and Commander of Division Artillery at Fort Richardson. Mr. Hamilton is a graduate of the U.S. Military Academy at West Point and is the recipient of the Army’s highest peacetime award, the Distinguished Service Medal.

BYRON I. MALLOTT

Mr. Mallott, age 58, has been a director since 1982 and is Chairman of the Company’s Audit Committee. He is President of the First Alaskans Foundation (a nonprofit organization dedicated to the development of Alaska Native peoples and their communities). From 1995 to 1999, he served as Executive Director (chief executive officer) of the Alaska Permanent Fund Corporation, a trust managing proceeds from the state of Alaska’s oil revenues. He was a director of Sealaska Corporation, Juneau, Alaska, from 1972 to 1988, Chairman from 1976 to 1983, and Chief Executive Officer from 1982 to 1992. He owns Mallott Enterprises (personal investments) and is a director of Horizon Air, Sealaska Corporation, and the Native American Bank, N.A. in Denver, Colorado.

RICHARD A. WIEN

Mr. Wien, age 66, has been a director since 1982. He serves on the Company’s Audit Committee and chairs the Safety Committee. Mr. Wien played an active role in the management of Wien Airlines until 1969, when he was elected President of Merric, Inc., an Alaska helicopter contract and charter service company. After Merric merged with Era Aviation in 1973, Mr. Wien served as Era’s Executive Vice President until 1981. He has been Chairman and Chief Executive Officer of Florcraft, Inc. (retail flooring), Fairbanks and Anchorage, Alaska, since 1986. He is also a director of Horizon Air and Usibelli Coal Mine.

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[SIDEBAR]
Current Board members

•		William S. Ayer
•		Ronald F. Cosgrave
•		Mary Jane Fate
•		John F. Kelly

WHO ARE THE OTHER DIRECTORS?

WILLIAM S. AYER

Mr. Ayer, age 47, has been a director since 1999. He is President and Chief Executive Officer of Alaska Airlines and served as the airline’s president and chief operating officer from November 1997 to January 2002. Prior to that, he was Sr. Vice President Operations at Horizon Air. Mr. Ayer serves on the boards of Alaska Airlines, AirLifeLine, Inc., the Alaska Airlines Foundation, the University of Washington Business School Advisory Board, and the Ronald McDonald House Charities of Western Washington. His term will expire in 2004.

RONALD F. COSGRAVE

Mr. Cosgrave, age 70, serves on the Company’s Executive and Nominating Committees. He has served on the Board of Directors since 1971, except during the period 1981 to 1983. He was Chairman of Alaska Northwest Properties Inc. from 1979 to 1997, when he became Executive Manager of ANP, LLC. Mr. Cosgrave is a retired Chairman and Chief Executive Officer of Alaska Airlines. He is also Chairman Emeritus and a director of Alaska Airlines. Mr. Cosgrave’s term will expire in 2004.

MARY JANE FATE

Mrs. Fate, age 68, has been a director since 1979 and serves on the Company’s Compensation Committee. She has served as General Manager of a family business in Fairbanks, Alaska, since 1989. She is a director of Alaska Airlines and of Baan o yeel kon Corporation (an Alaska Native village corporation), where she also served as President and Executive Director from 1981 to 1989. She was on the University of Alaska Board of Regents until 2001, when she was appointed Commissioner of the U.S. Arctic Research Commission by President Bush. She also serves on the board of the Breast Cancer Detection Center of Alaska, Inc. Mrs. Fate’s term expires in 2003.

JOHN F. KELLY

Mr. Kelly, age 57, has been a director since 1989 and serves on the Company’s Executive Committee. He has served as Chairman, President and Chief Executive Officer of Alaska Air Group and Chairman of Alaska Airlines since February 1995. He was Alaska Airlines’ CEO from 1995 to January 2002, President from 1995 to 1997, Chief Operating Officer from November 1994 to February 1995 and Vice President/Marketing from 1981 to June 1987. He has served Horizon Air as its Chairman since February 1991, except the period from November 1994 to February 1995, and was President and Chief Executive Officer from June 1987 to November 1994. He also serves on the board of the Air Transport Association, the Washington Roundtable, and is a director of Avista Corporation, a public utility based in Spokane, Washington. Mr. Kelly’s term expires in 2003.

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[SIDEBAR]
Current Board members

•		Bruce R. Kennedy
•		R. Marc Langland
•		John V. Rindlaub
•		J. Kenneth Thompson

BRUCE R. KENNEDY

Mr. Kennedy, age 63, has been a director since 1972 and serves as Chairman of the Nominating Committee. He has served as Chairman of the Company’s Executive Committee since 1985, except for the period from November 1994 to February 1995. He is Chairman Emeritus of Alaska Air Group and served as its Chairman, Chief Executive Officer and President from 1985 to 1991. He was also Chairman of Alaska Airlines from 1979 to 1991, Chief Executive Officer from 1979 to 1990 and President from 1978 to 1990. He is on the board of directors of Horizon Air and serves as Chairman of the Board of Trustees of CRISTA Ministries, and as Chairman of Packer Aircraft Trust LLC, a not-for-profit aircraft design and manufacturing company. Mr. Kennedy’s term expires in 2003.

R. MARC LANGLAND

Mr. Langland, age 60, has been a director since 1991. He is a member of the Company’s Executive and Nominating Committees and Chairman of the Compensation Committee. He has been President of Northrim Bank, Anchorage, Alaska, since November 1990 and Chairman since January 1998. He was Chairman and Chief Executive Officer of Key Bank of Alaska from 1987 to 1988 and President from 1985 to 1987. He served on the Board of Trustees of the Alaska Permanent Fund Corporation from February 1987 to January 1991 and was Chairman from June 1990 to January 1991. He is also a director of Alaska Airlines, Northrim Bank, Usibelli Coal Mine, and Saltchuk Resources, Inc. Mr. Langland’s term will expire in 2004.

JOHN V. RINDLAUB

Mr. Rindlaub, age 57, has been a director since 1996 and serves on the Company’s Audit and Compensation Committees. He is CEO, Pacific Northwest Region, Wells Fargo Bank. Prior to joining Wells Fargo, he held a number of positions with Bank of America between 1989 and 2001, including President, Bank of America, Northwest and Chairman of Seafirst Bank. Prior to his position at Seafirst, Mr. Rindlaub was Group Executive Vice President/Asia Division for Bank America and a managing director for Bankers Trust Company New York, Investment Banking Group. He is also a director of Horizon Air. Mr. Rindlaub’s term will expire in 2004.

J. KENNETH THOMPSON

Mr. Thompson, age 50, has been a director since October 1999 and serves on the Company’s Compensation Committee and its Safety Committee. He served as executive vice president of ARCO’s Asia Pacific oil and gas operating companies in Alaska, California, Indonesia, China and Singapore from 1998 to 2000. Prior to that, he was President of ARCO Alaska, Inc., the parent company’s oil and gas producing division based in Anchorage. Mr. Thompson is President of Pacific Rim Leadership Development, LLC, an executive consulting firm in Anchorage, Alaska. Mr. Thompson’s term expires in 2003.

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[SIDEBAR]
Amended and Restated 1999 Long-Term Incentive Equity Plan

PROPOSAL NO. 2
APPROVAL OF THE ALASKA AIR GROUP, INC. AMENDED AND RESTATED 1999 LONG-TERM INCENTIVE EQUITY PLAN

The Board has adopted and recommends a voteforapproval of the Alaska Air Group, Inc. 1999 Long-Term Incentive Equity Plan as amended and restated (the “1999 Plan”).

As of April 1, 2002, the 1999 Plan had approximately 75,000 shares of common stock available for grant. Currently, 2,966,262 shares are subject to outstanding options granted under all the Company’s current and prior option plans, including the 1999 Plan. This number represents 11% of the currently outstanding shares. If approved by stockholders, the 1999 Plan, as amended, would authorize an additional 1,200,000 shares for issuance and would reduce from 600,000 to 75,000 the number of shares that could be granted as stock awards.

A copy of the 1999 Plan, as amended, is attached to the proxy statement as Appendix A and is incorporated herein by reference. The following description of the amended 1999 Plan is a summary. Please refer to Appendix A for a complete description of the 1999 Plan and its terms.

Purpose.
The purpose of the 1999 Plan is to promote the Company’s long-term profitability and enhance value for its stockholders by:

•			encouraging key employees and officers of the Company and its subsidiaries to focus on long-range objectives,
•			providing a means to attract and retain the services of employees with exceptional qualifications, and
•			linking the interests of key employees directly to stockholder interests.

Term.
The 1999 Plan was approved by the Company’s stockholders on May 18, 1999. No award may be made after May 18, 2004, the fifth anniversary of the plan’s original approval by stockholders.

Administration.
The 1999 Plan is administered by the Compensation Committee of the Board (the “Committee”). The Committee is composed of two or more nonemployee directors, each of whom is intended to qualify to administer the 1999 Plan under Rule 16b-3 of the Securities Exchange Act and Section 162(m) of the Internal Revenue Code. No member of the Committee is eligible to participate in the 1999 Plan.
The Committee has the authority to:

•			interpret the 1999 Plan,
•			establish rules and regulations for its operation,
•			select employees to receive awards, and
•			determine the form, amount and other terms and conditions of such awards.

Stock Subject to the Plan.
Subject to adjustment for stock splits or other extraordinary events, such as a change in capitalization, a maximum of 2,400,000 shares are available for issuance to participants under the 1999 Plan. This

Page 12

number includes the additional 1,200,000 shares for which stockholder approval is being sought. Shares underlying previously granted awards become available for re-grant if:

•			options or SARs expire, terminate or are canceled prior to exercise, or
•			stock awards are forfeited.

In addition, shares that otherwise would be issuable under an award, but are used as payment in connection with an award, will be made available for grant. Where an SAR or other award is settled in cash, the shares related to such award will also remain available for grant. The maximum number of shares available for issuance under the 1999 Plan will not be reduced to reflect any dividends or dividend equivalents.

Limitation on Awards.
No more than 75,000 shares of the total authorized under the 1999 Plan may be issued as stock awards, and no single individual may be granted awards relating to more than 600,000 shares during any consecutive three-year period.

Eligibility for Participation.
Awards may be granted under the 1999 Plan to those officers and employees of Alaska Air Group and its subsidiaries that the Committee may from time to time select. As of April 1, 2002, approximately 250 employees are expected to participate in the 1999 Plan.

Types of Awards.
Awards under the 1999 Plan may take the form of incentive or nonqualified stock options, stock appreciation rights (“SARs”), or stock awards denominated in units or in shares of the Company’s common stock which may, at the Committee’s discretion, vest based on continuous service or on the achievement of performance goals.

Stock Options:A stock option is the right to acquire common stock at an exercise price equal to or greater than the fair market value of Company stock on the date of grant. Options include nonqualified stock options (“NSOs”) and incentive stock options (“ISOs”). ISOs are intended to qualify for special tax treatment under Section 422 of the Code. Stock options must be granted with an exercise price at least equal to 100% of the common stock’s fair market value on the date of grant and are also subject to a vesting schedule determined by the Committee. The 1999 Plan prohibits the repricing of stock options and SARs.

SARs:An SAR is a right to receive a payment in cash and/or shares equal to the appreciation in market value of the Company’s common stock since the grant of the SAR. SARs may be granted along with stock options or by themselves. The exercise price of an SAR will never be less than the fair market value of the common stock on the date of grant.

Stock Awards:Stock awards may be subject to conditions determined by the Committee. Generally, those conditions include continuous service with the Company for at least three years or achieving performance goals related to profits, profit growth, profit-related return ratios, cash flow or stockholder return.

Any award under the 1999 Plan may include one or a combination of these grant types.

Other Information.
The closing price of the Company’s common stock reported on the New York Stock Exchange on April 1, 2002 was $32.60 per share.

Amendment of Plan.
Only the Board may amend the 1999 Plan. However, stockholder approval is required for any amendment that would increase the number of shares available for issuance under the Plan.

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Other Terms of Awards.
Generally, no payment is required upon the grant of any award. Upon exercise of an option, the optionee must pay the exercise price to the Company in cash or by any other method permitted by the Committee, including by tendering shares, authorizing a broker-assisted cashless exercise or by any combination of these methods. The Committee may decide that awards earn dividends or dividend equivalents. The Committee may establish other terms, conditions, and limitations for an award that are not inconsistent with the 1999 Plan including, but not limited to, the term of an award and the provisions applicable if a participant’s employment ends for any reason.

Acceleration and Settlement of Awards.
The Committee may accelerate the vesting or settlement of an award at any time before a sale, merger, consolidation, reorganization, liquidation, or change in control as defined by the Committee.

Federal Income Tax Consequences.
Under current federal income tax laws, the federal income tax consequences of options and SARs under the 1999 Plan can be summarized as follows:

At the time the options or SARs are granted, the award will have no federal income tax consequences to the Company or the optionee.

Upon the exercise of NSOs or SARs, the optionee generally will recognize ordinary income equal to the fair market value of the shares at the time of exercise minus the exercise price. This ordinary income will be subject to withholding tax, and the amount of ordinary income recognized by the optionee generally will be deductible for tax purposes by the Company. When the shares are sold or otherwise disposed of, any additional gain or loss by the holder will be capital gain or loss.

The exercise of ISOs does not result in any regular taxable income to the optionee, nor is the Company entitled to a deduction. However, the excess of the fair market value of the ISO shares at the time of exercise over the exercise price is an item of tax preference for purposes of computing alternative minimum taxable income. If the shares are held for one year after exercise and two years after grant, the difference between the sale price and the exercise price generally will be taxable as long-term capital gain or loss. If the shares are not held for that period, the optionee will recognize ordinary income at the time of early disposition equal to the excess of the fair market value of the shares at exercise over the exercise price, and the Company will be entitled to a corresponding deduction. Any additional gain on the disposition will be taxed as capital gain.

The foregoing discussion is general in nature and does not address issues relating to the income tax circumstances of any individual employee. The discussion is based on federal income tax laws in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary does not address the consequences of state, local or foreign tax laws.

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Limitation on Income Tax Deduction.

See page 29 for a description of the effect of Section 162(m) of the Internal Revenue Code. The 1999 Plan has been designed to allow the Committee to grant awards that will qualify as “Performance-Based Compensation” under Section 162(m) of the Code and thus be fully deductible.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 2.
FORELECTION OF EACH OF THE DIRECTOR NOMINEES.

Page 151 1

[SIDEBAR]
2002 Employee Stock Purchase PlanCONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2004

PROPOSAL NO. 3
APPROVAL OF THE ALASKA AIR GROUP, INC. 2002 EMPLOYEE STOCK PURCHASE PLAN

The Board is seeking stockholder approval of the Alaska Air Group, Inc. 2002 Employee Stock Purchase Plan (the “ESPP”). On January 30, 2002, the Board adopted the ESPP subject to approval by the stockholders at the annual meeting.

A copy of the proposed ESPP is attached to this proxy statement as Appendix B and is incorporated herein by reference. The following description of the ESPP is a summary. Please refer to Appendix B for a complete description of the plan and its terms.

Purpose.
The purpose of the ESPP is to assist employees of the Company and its designated subsidiaries in acquiring a stock ownership interest in the Company pursuant to a plan that is intended to qualify for beneficial tax treatment under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). The ESPP is also intended to encourage employees to work in the best interests of the stockholders, to support recruitment and retention of qualified employees and to provide employees with an advantageous means of accumulating long-term investments.

Administration.
The ESPP may be administered by the Company’s Board of Directors or any Board-appointed committee, or by one or more executive officers designated by the Board. The plan administrator is authorized to administer and interpret the ESPP and to make such rules and regulations as it deems necessary to administer the ESPP, so long as such interpretation, administration or application regarding purchases corresponds to the requirements of Code Section 423.

Stock Subject to the ESPP.
Under the ESPP, qualified employees may purchase shares of common stock through payroll deductions at a discount from market price, without incurring broker commissions. A maximum of 1,000,000 shares of common stock, subject to adjustment for stock splits and similar adjustments, will be available for purchase under the ESPP. The common stock issued under the ESPP will be from authorized but unissued shares of the Company’s common stock or from shares subsequently acquired as treasury shares.

Eligibility.
Participation in the ESPP is voluntary. To be eligible to participate in the ESPP, an employee must have been employed by the Company or a designated subsidiary for a minimum of one year, and may not own 5% or more of the combined voting power or value of the Company’s capital stock or that of any related corporations. For future offering periods, the plan administrator may change the one-year employment requirement or may require that employees work a certain minimum number of hours per week or months per year, subject to the limits of Code Section 423. Nonemployee directors of the Company are not eligible to participate in the ESPP. Approximately 15,000 employees are eligible to participate in the ESPP.

Page 161 2

Offering and Purchase Periods.
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2005

Restriction on Immediate Sale of Stock.
Employees must hold common stock they have acquired under the ESPP for a minimum of one year, unless the Board sets a different holding period for any future offering period.CORPORATE GOVERNANCE

Amendment, Suspension and Termination of the ESPP.The Board has the power to amend, suspend or terminate the ESPP, except that the Board may not amend the ESPP without stockholder approval if such approval is required by Code Section 423. Unless sooner terminated, the ESPP will terminate on January 30, 2012.

Federal Income Tax Consequences.
The Company intends that the ESPP qualify as an “employee stock purchase plan” under Code Section 423. The following discussion summarizes the material federal income tax consequences to the Company and the participating employees in connection with the ESPP under existing applicable provisions of the Code and the accompanying Treasury Regulations. The discussion is general in nature and does not address issues relating to the income tax circumstances of any individual employee. The discussion is based on federal income tax laws in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The discussion does not address the consequences of state, local or foreign tax laws.

Under the Code, the Company is deemed to grant employee participants in the ESPP an “option” on the first day of each offering period to purchase as many shares of common stock as the employee will be able to purchase with the payroll deductions credited to his or her account during the offering period. On the last day of each three-month purchase period, the purchase price is determined and the employee is deemed to have exercised the “option” and purchased the number of shares of common stock his or her accumulated payroll deductions will purchase at the purchase price.

The required holding period for favorable federal income tax treatment upon disposition of common stock acquired under the ESPP is the later of (1) two years after the deemed “option” is granted (the first day of an offering period) and (2) one year after the deemed “option” is exercised and the common stock is purchased (the purchase date). When the common stock is disposed of after this period (a “qualifying disposition”), the employee realizes ordinary income to the extent of the lesser of (a) the amount by which the fair market value of the common stock at the time the deemed “option” was granted exceeded the “option price” and (b) the amount by which the fair market value of the common stock at the time of the disposition exceeded the “option price.” The “option price” is equal to 85% of the lesser of the fair market value of the common stock on the first day of the offering period and the fair market value of the common stock on the purchase date. Thus, the maximum amount of gain taxable as ordinary income is the amount of the 15% discount measured as of the last day of a purchase period. Any further gain recognized on a qualifying disposition will be long-term capital gain. If the sale price is less than the option price, there is no ordinary income and any loss recognized generally will be a long-term capital loss.

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When an employee sells the common stock before the expiration of the required holding period (a “disqualifying disposition”), the employee recognizes ordinary income to the extent of the difference between the price actually paid for the common stock and the fair market value of the common stock at the date the option was exercised (the purchase date), regardless of the price at which the common stock is sold. Any additional gain recognized upon the disqualifying disposition will be capital gain. The capital gain will be long-term if the employee held the shares more than 12 months. If the sale price is less than the fair market value of the common stock at the date of exercise, then the employee will have a capital loss equal to such difference.

Even though an employee must treat part of his or her gain on a qualifying disposition of the common stock as ordinary income, the Company may not take a business deduction for such amount. However, if an employee makes a disqualifying disposition, the amount of income that the employee must report as ordinary income qualifies as a business deduction for the Company for the year of such disposition.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” PROPOSAL 3.

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[SIDEBAR]
Simple-Majority Voting

PROPOSAL NO. 4
STOCKHOLDER PROPOSAL ON SIMPLE-MAJORITY VOTING

A stockholder has advised the Company that he intends to present the following resolution at the annual meeting. In accordance with applicable proxy regulations, the proposed resolution and supporting statement, for which the Board of Directors and the Company accept no responsibility, are set forth below.

Stockholder Resolution
IMPLEMENT SIMPLE-MAJORITY VOTE
This topic won 96% of the yes-no shareholder vote in 2001.
Alaska Air shareholders request that our company take the steps necessary to implement a policy of simple-majority vote. This policy, which has key elements of the Alaska Air proposal that won 96% support, includes:

•		Application to all issues submitted to shareholder vote to the fullest extent possible.
•		A policy of the greatest flexibility to implement the spirit and the letter of this topic to the fullest extent possible and as soon as possible.
•		Any future simple/super-majority proposal be put to shareholder vote — as a separate ballot item.
•		Our directors commit to make their best effort to implement this policy within 90 days of the annual meeting, with the resources available to our directors, and then meet this commitment.
•		Thus our company is to make its best effort to obtain the high number of votes, from all the shares in existence.

Proponent’s Supporting Statement
An overwhelming 96% of the yes-no shareholder vote
This topic won an overwhelming 96% of the yes-no shareholder vote at Alaska Air in 2001. However, company rules for some reason require an 80% yes vote from all shares in existence. The 2001 shareholder vote turn-out was 75%. I believe the directors can make a better effort to win a higher vote turn-out.

A premium for good governance profile
A survey by McKinsey & Co. shows that institutional investors are prepared to pay an 18% premium for good corporate governance.Wall Street Journal — June 19, 2000

A start to improve the governance profile of our company
I believe that conventional wisdom holds that when many items can be improved — that starting with at least one improvement should receive increased attention. Specifically, at Alaska Air there are a number of current or recent practices that institutional investors, who have a fiduciary duty obligation, believe could be improved such as:

•		Allow a simple-majority vote to approve a merger.
•		Remove limits on shareholder right to amend our company’s charter or bylaws.

     Influential institutional investors supporting this include:

1)

Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF). Source: TIAA-CREF Policy Statement on Corporate Governance

2)

California Public Employees Retirement System (CalPERS) Source: CalPERS U.S. Corporate governance Principles.

IMPLEMENT SIMPLE-MAJORITY VOTE
This topic won 96% of the yes-no shareholder vote in 2001
YES on 4

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Board of Directors’ Response
The Board of Directors recommends a vote AGAINST this proposal as presented for the following reasons. The Board believes that:

•			The proposal is unclear. It does not say whether the simple majority should be measured by the votes cast, the shares present and entitled to vote, or by the shares outstanding. If the proposal intends that all matters be passed upon approval by a simple majority of the shares outstanding, this would make passage more difficult than it currently is for most issues that come before the stockholders. If, on the other hand, the proposal means that a matter would be passed if it received a majority of the votes present and entitled to vote, the proposal would be in violation of Delaware law, which requires that certain issues be decided based on a majority of the shares outstanding.
•			The proposal, in its present form, is inconsistent with Delaware law. Delaware law provides protections for all stockholders by requiring the affirmative vote of at least a majority of the outstanding shares entitled to vote (contrasted with a majority of the votes present and entitled to vote at a meeting) for certain fundamental corporate actions, such as amending the certificate of incorporation, approving certain mergers, selling substantially all the Company’s assets or dissolving the corporation.
			Delaware law also contains several specific super-majority voting requirements for certain business combinations involving “interested stockholders.” These “super-majority” provisions, like those contained in the governance documents of many public corporations and many corporate statutes, are designed to provide protection for all stockholders against self-interested actions by one or a few large stockholders. These provisions are not intended to, and do not, preclude unsolicited, non-abusive offers to acquire the Company at a fair price. They are designed, instead, to encourage any potential acquirer to negotiate directly with the Board. This is desirable because the Company believes the Board is in the best position to evaluate the adequacy and fairness of proposed offers, to negotiate on behalf of all stockholders and to protect stockholders against abusive tactics during a takeover process.
•			The proposal asks the Board to take extraordinary and costly actions that are not in the interests of all the stockholders. The proposal asks the directors to commit to implementing simple-majority voting within 90 days of passage. As explained previously, the Board cannot amend the Company’s certificate of incorporation, which contains a requirement for an 80% super-majority under certain specific conditions, without stockholder approval. In order to implement this proposal within 90 days, the Board would need to hold a costly, second stockholders meeting within 90 days of the 2002 annual meeting in order to amend the articles of incorporation.

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A shareholder-sponsored proposal on simple majority voting was submitted for shareholder vote for the first time in the Company’s 2000 Proxy Statement. That proposal was approved by a majority of the shares present and entitled to vote at the 2000 Annual Meeting. In response, the Board of Directors sponsored a proposal, which appeared in the Company’s 2001 Proxy Statement, that would have amended the Company’s Certificate of Incorporation to delete the 80% super-majority voting requirement contained in Article 10 of the certificate. Article 10 was adopted to curb a potential abusive takeover of the Company. It was adopted in 1985, prior to the enactment of Section 203 of the Delaware General Corporation Law (“Section 203”), a statutory provision also designed to curb abusive takeovers of Delaware corporations. The Board believed that amending Article 10 would not have adversely affected the Company or its stockholders because the Company would continue to be protected under Section 203.

The proponent’s proposal refers to an Alaska Air proposal that garnered 96% of the yes-no shareholder vote last year. The proposal that won that level of support was one that was sponsored by the Board of Directors to eliminate a specific 80% super-majority voting requirement for certain transactions. It was not the shareholder proposal on simple-majority voting that was submitted by the proponent at the 2001 Annual Meeting.

The Board of Directors’ proposal would have been approved if at least 80% of the total shares outstanding as of the record date for the 2001 Annual Meeting (March 16, 2001) had voted in favor of the proposal. Under Delaware law, the 80% voting requirement cannot be removed from the Certificate of Incorporation without the approval of at least 80% of all the shares outstanding. Although 96% of the shares present at the meeting voted for approval, only 73% of the total shares outstanding were voted in favor of the Board’s proposal at the 2001 Annual Meeting. As discussed above, the required vote of 80% of the outstanding shares for passage of the Board’s proposal is a requirement of Delaware law, not “Company rules,” as the proponent states.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” PROPOSAL 4.

The Company will provide the name and address of the proponent of the shareholder proposal above and the number of shares the proponent holds upon oral or written request for such information. Requests may be sent to the Corporate Secretary, Alaska Air Group, Inc., P.O. Box 68947, Seattle, Washington, 98168-0947 or by calling (206) 431-7218.

OTHER BUSINESS

Other than the election of directors and the stockholder proposals included in this proxy statement, we are not aware of any other matters to be properly presented for a vote at the annual meeting. If other matters are properly presented at the meeting, or for any adjournment or postponement of the meeting, Mr. John F. Kelly and Mr. Keith Loveless will vote on your behalf in accordance with their best judgment on such matters.

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[SIDEBAR]
Committees of the Board

•		Members
•		Functions
•		Meetings held

STRUCTURE OF THE BOARD OF DIRECTORS

TheIn accordance with the Delaware General Corporation Law and the Company’s Certificate of Incorporation and Bylaws, our business affairs are managed under the direction of our Board of Directors. Directors meet their responsibilities by, among other things, participating in meetings of the Board and Board committees on which they sit, discussing matters with our Chairman and Chief Executive Officer and other officers, reviewing materials provided to them, and visiting our facilities.

Pursuant to the Bylaws, the Board of Directors heldhas established four regular meetingsstanding committees, which are the Audit Committee, the Compensation Committee, the Governance and one special meeting in 2001. Each director attended at least 90%Nominating Committee, and the Safety Committee. Only independent directors serve on these committees. The Board has adopted a written charter for each committee. The charters of allthe Audit, Compensation, and Governance and Nominating Committees are attached as Appendices A, B and C to this proxy statement.

The table below shows the current membership of the standing Board and applicable committee meetings during 2001. This table describescommittees. An asterisk identifies the Board’s committees.chairman of each committee.

*     Committee chair.

The principal functions of the standing Board committees are as follows.

Audit Committee

1.

Matters pertaining to the independent auditors:

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	•		review at least annually their statement regarding their internal quality-control procedures and their relationship with the Company;
	•		maintain a dialogue with respect to their independence;
	•		pre-approve all auditing and non-auditing services they are to perform;
	•		review annual and quarterly financial statements; and
	•		receive and review communications required from the independent auditors under applicable rules and standards.

2.		Review the planned activities and results of the internal auditor and any changes in the internal audit charter.
3.		Prepare the Audit Committee report required for the annual proxy statement.
4.		Matters pertaining to controls:

	•		review financial risk and associated internal controls;
	•		review procedures with respect to significant accounting policies and the adequacy of financial controls;
	•		discuss with management earnings releases and any information provided to analysts and rating agencies;
	•		develop and monitor a Corporate Compliance program, including a Code of Conduct and Ethics, decide on requested changes to or waivers of such program and code, and establish procedures for confidential treatment of complaints concerning accounting, internal controls or auditing matters; and
	•		obtain and review at least quarterly a statement from the CEO, CFO and Disclosure Committee disclosing any significant deficiencies in internal controls and any fraud that involves management or other employees with significant roles in internal controls.

5.

Other matters: annually review and reassess the adequacy of its charter and the Committee’s performance and recommend any proposed changes to the Board of Directors.

Compensation Committee

1.		Establish the process for approving corporate goals relevant to CEO compensation and evaluating CEO performance in light of those goals.
2.		Set the salary of the CEO.
3.		Approve salaries of other executive officers of the Company and of Alaska Airlines and Horizon Air; makesAir.
4.		Set annual goals under the Performance-Based Pay Plan and administer the Plan.
5.		Grant stock awards and stock options.
6.		Administer the supplementary retirement plans for elected officers and the equity-based incentive plans.
7.		Make recommendations to the Board regarding other executive compensation issues, including modification or adoption of executive compensation plans; grants stock awardsplans.
8.		Fulfill ERISA fiduciary and stock options; administersnon-fiduciary functions for tax-qualified retirement plans by monitoring the Pension/Benefits Administrative Committee and the Pension/Benefits Investment Fund Committee, and approving the membership of those committees, trustees and trust agreements, and extension of plan participation to employees of subsidiaries.
9.		Approve the terms of employment and severance agreements with elected officers and the form of change-in-control agreements.
10.		Review management development and succession plans.

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11.		Administer the Company’s stock option and other long-term incentive plans.
12.			Produce the report on executive compensation required for the annual proxy statement.
EXECUTIVE Bruce R. Kennedy* Ronald F. Cosgrave John F. Kelly R. Marc Langland13.		— —		overseesAnnually review and reassess the CEO evaluation process; makes recommendationsadequacy of its charter and recommend any proposed changes in the charter to the Board regarding committee/subsidiary service.		6of Directors.
NOMINATING14.		—Annually review the Committee’s performance.

Governance and Nominating Committee

1.		selects director nominees		3			Develop and monitor the Corporate Governance Guidelines.
Bruce R. Kennedy* Ronald F. Cosgrave R. Marc Langland2.								Evaluate the size and composition of the Board.
SAFETY Richard A. Wien*3.		— —Develop criteria for Board membership.
4.		monitorsEvaluate the independence of existing and prospective members of the Board.
5.		Seek qualified candidates for election to the Board.
6.		Evaluate the nature, structure and composition of other Board committees.
7.		Take steps it deems necessary or appropriate with respect to annual assessments of the performance of the Board, each other Board committee, and itself.
8.		Annually review and reassess the adequacy of its charter.

Safety Committee

1.		Monitor management efforts to ensure the safety of passengers and employees; monitorsemployees.
2.		Monitor and assistsassist management in creating		4
Mark R. Hamilton J. Kenneth Thompson		— —		a uniform safety culture that achieves the highest possible industry performance measures; periodically reviewsmeasures.
3.		Periodically review with management and outside experts all aspects of airline safety; evaluatessafety.
4.		Evaluate the Company’s compliance withhealth, safety and environmental regulations.policies and practices.
The Board of Directors held 4 regular meetings and 6 special meetings in 2002. The standing Board committees in 2002 and the number of meetings they held were as follows:

	•		Audit Committee – 8
	•		Compensation Committee – 5
	•		Executive Committee – 6
	•		Nominating Committee – 5
	•		Safety Committee – 4

*ChairpersonEach director attended at least 80% of all Board and applicable committee meetings during 2002.

Page 23BOARD AND COMMITTEE INDEPENDENCE

Each member of the Company’s Audit Committee meets the independence, financial literacy and experience requirements defined in the listing standards of the NYSE (in effect as of the date of this proxy statement). Furthermore, the Board of Directors of the Company has determined that the Board meets the criteria for independence under theproposedlisting standards of the NYSE currently under review by the SEC. Specifically, a majority of the directors, and each member of the Audit Committee, Compensation Committee and Governance and Nominating Committee:

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	1.		have not been employed by the Company within the last five years;
	2.		have not been employed by or otherwise affiliated with the Company’s independent auditor within the last five years;
	3.		have not, within the last five years, been part of an interlocking directorate in which an executive officer of the Company serves on the compensation committee of another company that concurrently employs the director; and
	4.		otherwise have no material relationship with the Company.

With respect to the fourth standard, the Board considers that the following situations do not create material relationships:

	a)		the receipt by a director of retirement compensation earned under one or more tax-qualified or nonqualified plans during the director’s employment with the Company;
	b)		ordinary-course business between the Company and an organization of which the Board member is an officer or director, where the amount of such business is immaterial with respect to the Company’s or the organization’s annual revenues; or
	c)		the receipt of cash or in-kind contributions from the Company by a tax-exempt charitable organization of which the Board member is an officer or director, the value of which is immaterial with respect to the Company’s or the charitable organization’s annual revenues.

For the purposes of the four standards stated above, “Company” includes the Alaska Air Group’s subsidiaries and other affiliates. In addition, the immediate family members of the independent directors meet the same standards. The members of the Audit Committee, in addition to the foregoing criteria, meet the proposed NYSE independence standard that they receive no compensation other than director’s fees for Audit Committee service and permitted retirement pay.

[SIDEBAR]
EXECUTIVE SESSIONS AND LEAD DIRECTOR

The Board has set stock ownership guidelines for directors.

DIRECTOR COMPENSATION

We do not pay directors who are also employees of the Company any additional compensation for their service as directors, except for the reimbursement of expenses incurred in attending meetings. In 2001,2002, compensation for nonemployee directors included the following:

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	•		an annual retainer of $20,000, with a minimum of 25% of the retainer paid in the form of Alaska Air Group common stock issued under the Company’s Nonemployee Director Stock Plan;
	•		$1,200 for each Board or committee meeting in which a nonemployee director participated in person. Ifperson, or $750 if participation was via telephone, the fee was $750;telephone;
	•		an annual retainer of $2,000 to committee chairpersons;
	•		an annual retainer of $1,000 to nonemployee directors who served on the Board of Directors of Alaska Airlines or Horizon Air; and
	•		reimbursement of expenses in connection with attending Board and committee meetings.

In addition, directors, their spouses and their dependent children are eligible for complimentary travel privileges on Alaska Airlines and Horizon Air.

Page 24CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company and its subsidiaries have transactions in the ordinary course of business with other corporations of which the Company’s directors are executive officers. The amounts involved are below disclosure thresholds set by the SEC, and, in any case, the Company does not consider the amounts involved in such transactions to be material in relation to its business and believes that such amounts are not material in relation to the business of such other corporations or the interests of the directors involved.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and certain of its officers to send reports of their ownership of Company common stock and changes in such ownership to the SEC and the NYSE. The Company assists its directors and officers by preparing forms for filing. SEC regulations also require the Company to identify in this proxy statement any person subject to this requirement who failed to file a report on a timely basis. Based on a review of copies of reports furnished to the Company and written representations that no reports were required, the Company believes that all of its directors and officers subject to Section 16(a) complied with the reporting requirements with respect to transactions during 2002.

INDEPENDENT AUDITORS

Termination of Arthur Andersen LLP; Engagement of Deloitte & Touche LLP

On May 22, 2002, the Company dismissed Arthur Andersen LLP (“Andersen”), and engaged Deloitte & Touche LLP, as its independent auditors. This determination was recommended by the Audit Committee and approved by the Board of Directors.

The Company disclosed these events in a Current Report on Form 8-K filed with the SEC on May 28, 2002 (the “Form 8-K”) and an amendment thereto filed on June 8, 2002, which included the following information:

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		Andersen’s reports on the Company’s financial statements for each of the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
		During the years ended December 31, 2001 and 2000 and the interim period between December 31, 2001 and the dismissal of Andersen, there were no disagreements between the Company and Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to Andersen’s satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their report for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
		During the years ended December 31, 2001 and 2000 and the interim period between December 31, 2001 and the dismissal of Andersen, neither the Company nor anyone acting on its behalf consulted Deloitte & Touche LLP with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or any other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.
		Andersen provided to the Company a letter addressed to the SEC stating that it agreed with the statements of the Company made in the Form 8-K in response to Item 304(a).

Selection of Independent Auditors for the Current Fiscal Year

The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as the Company’s independent public auditors for the current fiscal year. Representatives of Deloitte & Touche LLP are expected to attend the meeting to respond to questions from stockholders and will have the opportunity to make a statement, if they wish to do so.

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[SIDEBAR]
Stock owned by holdersFees to Independent Auditors

During fiscal year 2002, the Company retained its principal auditors, Arthur Andersen LLP and Deloitte & Touche LLP, to provide services in the following categories and amounts.

		(1) Fees for professional services in connection with the audit of Alaska Airlines 401(k) plans.
		(2) Fees for professional services in connection with tax consulting, planning and tax return review.
		(3) Fees for professional services in connection with the audit of the security costs incurred as reported to the Transportation Security     Administration, and accounting and reporting issues related to the airline government assistance.