In a stinging rebuke: Shareholders of Alaska Air Group withheld up to 42% of the vote from management's nominees, passed two binding mandatory bylaw shareholder proposals by the required super majority votes and gave majority votes to two other proposals. This now brings the total to 17 proposals in 6 years that have won majority votes. This is the first time that binding proposals were included. The two winning mandatory bylaw proposals called for eliminating the staggered board proposed by Horizon Air Captain James E. Roberts and simple majority voting on bylaws proposed by Horizon Air Captain Mark Woods.

This is the third year that employee shareholders have made proposals, nominated candidates, worked with other shareholders, and conducted an "Internet Only" proxy contest. Spending less than $500 using www.votepal.com and email, the challengers were able to solicit enough shareholders to bring about this record-breaking super majority vote.

The binding proposal calling for annual election of directors won 76% of the votes cast or 68% of the outstanding shares. Alaska Air Group has a long, unvarnished record of opposing every call for better corporate governance. Stonewalling even included asserting to the SEC that once management opposed a proposal in its proxy statement that subsequent majority votes had no relevance.

This year, the company sought the SEC's permission to delete the binding proposals from its proxy arguing that such binding proposals could not be made. The SEC did not concur.

The company provided a legal opinion asserting that the proposals were not proper. The challengers presented an alternate legal analysis that concluded that Delaware Law does permit mandatory bylaws proposals.

It appears that the main thrust of management's argument against the binding bylaws was that other documents, such as the articles of incorporation, must be changed before the bylaws can be changed. However, the bylaw proposals place no impediments on the order in which management implements the clear wishes of the super majority of the shareholders.

It appears that management's other argument was that its board of directors, as the agents of the owners, were superior to the owners. We believe that is a legal impossibility. We do not believe Delaware law views shareholders as automatic incompetents with no rights over their agents. It remains to be seen what Alaska Air Group will do. We hope that this historic vote will mark a change of attitude towards respecting the will of its shareholders.

The following is an annotated synopsis of the "Official Report of the Inspector of Elections at the Alaska Air Group, Inc. 2005 Annual Meeting on May, 17, 2005 in Seattle, WA" presented by Carl T. Hagberg the appointed Independent Inspector of Elections on May 25, 2005. Additional information can be found at www.votepal.com

REGARDING THE EXISTENCE OF A QUORUM: Of the 27,182,129 shares outstanding as of the record date and entitled to vote, 24,241,472 shares were represented at the meeting, in person or by proxy, constituting a quorum for the transaction of business.

ALL PERCENTAGES WERE CALCULATED AND ADDED TO MR. HAGBERG'S REPORT. ALL ADDITIONS ARE IN COLOR. THE PERCENTAGES ARE ROUNDED UP FROM THE .5 PERCENTILE:

REGARDING THE ELECTION OF DIRECTORS:

NOMINEES OF THE CHALLENGERS

REGARDING PROPOSAL 2: RE: SHAREHOLDER RIGHTS PLAN

REGARDING PROPOSAL 3: RE: CONFIDENTIAL VOTING

REGARDING PROPOSAL 4: RE: CUMULATIVE VOTING

REGARDING PROPOSAL 5: RE: ANNUAL ELECTION OF DIRECTORS

REGARDING PROPOSAL 6; ADOPT SIMPLE MAJORITY VOTING BYLAW

REGARDING PROPOSAL 7: RE: SIMPLE MAJORITY VOTING

REGARDING PROPOSAL 8: RE: STOCKHOLDER NOMINEES

REGARDING PROPOSAL 9; "TRUTH OR CONSEQUENCES"

Bio material on Richard Foley & Steve Nieman

Richard D. Foley
Richard Foley is a retired conductor for the Southern Pacific Railroad and was a career-long member of the United Transportation Union (UTU). He served in the United States Navy from 1967 until 1972. He also served as the Chapter Chair for the United Shareholder's Association (USA) for Tucson and Southern Arizona.

Richard was a founder and Chairman of the American Employees Stock Ownership Association (AESOA). He led the team that worked for employee ownership of the Southern Pacific Railroad. AESOA provided many public training and assistance programs in the education and exercise of stock ownership rights. His shareholder proposal victory in 1988 was the first in the history of corporate America. That record-breaking victory charted a major course change in corporate governance that has spread around the world. His expert testimony before Congress, the work of USA, AESOA and others brought many positive changes in federal securities law and legislation.

Recently, Richard has been an advocate for shareowners at the Alaska Air Group, Inc., where he helped organize and ran in a proxy contest for a director seat in 2003, 2004 and 2005. He has also assisted shareholders at Mesa Air Group, Inc.

Richard is also co-founder and Chairman of the Ownership Union (OU®). The Ownership Union is a registered U.S. federal labor union started in 2002.

Richard participated in a special ambassador program for People to People and traveled to England, Germany, and Poland meeting with leaders in government, unions, and academics. He is the first foreign member of the Polish Employee Ownership Union. He is also a member of the Capital Ownership Group Virtual Think Tank hosted by Kent State University. He is a member of the Center for Social and Economic Justice.

Richard currently serves as the US Director of Marketing for the Institute of Integrated Rural Development (IIRD) that is building thousands of employee-owned enterprises among the poorest citizens of Bangladesh. He is also currently a director of the Patient Advocacy Foundation in Tucson, Arizona.

He lives in Tucson, Arizona with his family and is a member of the Catalina Foothills Church, PAC.

Steve Nieman
Since just before the beginning of U.S. airline deregulation in 1978, Steve Nieman has been working as a pilot in the airline industry. He has flown as a captain for Horizon Air for the past 26 years.

He has been active in labor, employee and the politics of corporate governance. He started an in-house union in 1988 for Horizon Air Pilots. In 1998, Steve founded the non-profit Horizon/Alaska Customer/Employee Co-Ownership Association Inc. (HACECA), which was incorporated in August 2000 in Washington state, but shut down in Dec. 2004.

One of HACECA's goals was to shift ownership of Alaska Airlines and Horizon Air toward the natural tripartite of employees stockowners, customer stockowners and public stockowners, instead of a high percentage of the stock being owned by large institutional investors--the case now for the AAG, Inc. (around 90 percent).

Steve is also a co-founder and President of the Ownership Union (OU®), and the author of the union's by-laws. The Ownership Union is a registered U.S. federal labor union started in 2002. The Ownership Union is an affiliate of the Center For Economic and Social Justice ("CESJ") and a supporting organization of the Global Justice Movement. Steve is a member of the CESJ and has been named to its Board of Counselors.

He is also a founding member of the American Revolutionary Party.

Steve ran for a board seat at the AAG, Inc. in 2003, 2004 and 2005.

Steve is a freelance writer, having published in magazines and newspapers, including THE WALL STREET JOURNAL.

The Ownership Union is available at no charge to assist shareholders with similar matters.

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