Supplemental Agreement No. 29 to Purchase Agreement No. 2497 between The Boeing Company and Alaska Airlines, Inc. Relating to Boeing Models 737-800 and 737-900ER Aircraft

THIS SUPPLEMENTAL AGREEMENT, entered into as of October 10, 2012, by and between THE BOEING COMPANY (Boeing) and ALASKA AIRLINES, INC. (Customer).

WHEREAS, the parties hereto entered into Purchase Agreement No. 2497 dated June 15, 2005 (Purchase Agreement), as amended and supplemented, relating to Boeing Model 737-800 aircraft (737-890 Aircraft) and 737-900ER aircraft (737-990ER Aircraft) (collectively referred to as Aircraft); and

WHEREAS, Boeing offered and Customer agrees to [***] Boeing Model 737-900ER aircraft as set forth below (Incremental Aircraft):

; and

WHEREAS, Customer agrees to exercise its option to [***] Option Aircraft described in Letter Agreement 2497-1R18 and concurrently substitute as 737-990ER Aircraft (Exercised Option Aircraft):

; and

WHEREAS, Customer and Boeing agree to amend the Purchase Agreement to substitute 737-990ER Aircraft in lieu of 737-890 Aircraft for the [***] delivery positions listed as follows (Subject Aircraft):

; and

WHEREAS, Buyer and Boeing agree to update Letter Agreement 2497-1R18 and Letter Agreement 2497-2R2 to clarify the language relating to airframe price for Option Aircraft and Substitute Aircraft.

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows:

1.1 Remove and replace, in its entirety, the “Table of Contents” with the Table of Contents, attached hereto, to reflect the changes made in this Supplemental Agreement. To aid in the administration of the Purchase Agreement, the new Table of Contents includes a section for Tables, Exhibits and Letter Agreements to the Purchase Agreement that Boeing and Customer agree are inactive or have been deleted from the Purchase Agreement.

1.2 “Table 1 to Purchase Agreement 2497” page 13 is hereby deleted in its entirety as a result of the Subject Aircraft being substituted to 737-990ER Aircraft in lieu of 737-890 Aircraft in this Supplemental Agreement.

1.3 “Table 1 to Purchase Agreement 2497” pages 15 and 16 are hereby deleted in their entirety and replaced with Table 1A, attached hereto, to reflect 737-990ER Aircraft associated with Exhibit A3 as of this Supplemental Agreement.

1.4 “Table 1 to Purchase Agreement 2497” page 17 is hereby deleted in its entirety and replaced with Table 1B, attached hereto, to reflect 737-990ER Aircraft associated with Exhibit A5 as of this Supplemental Agreement. Table 1B reflects the incorporation of the Incremental Aircraft, Exercised of Option Aircraft, and Subject Aircraft.

2.1 Exhibit A3, “Aircraft Configuration – 737-990ER Aircraft,” cover page is hereby deleted in its entirety and replaced with a revised Exhibit A3 cover page, attached hereto. Exhibit A3 applies to the 737-990ER Aircraft listed on Table 1A.

2.2 Exhibit A5, “Aircraft Configuration – 737-990ER Aircraft,” is hereby deleted in its entirety and replaced with a revised Exhibit A5, attached hereto. Such revised Exhibit A5 applies to the 737-990ER Aircraft listed on Table 1B.

Supplemental Exhibit BFE1, entitled “Buyer Furnished Equipment Variables,” is deleted in its entirety and replaced with a revised Supplemental Exhibit BFE1, attached hereto, to reflect the deletion of the BFE on-dock dates for the 737-890 Aircraft and the incorporation of the BFE on-dock dates related to the Incremental Aircraft, Exercised Option Aircraft, and Subject Aircraft.

4.1 Letter Agreement 2497-1R18, entitled “Option Aircraft,” is hereby deleted in its entirety and replaced with a revised Letter Agreement 2497-1R19 to reflect the deletion of the Exercised Option Aircraft pursuant to this Supplemental Agreement. In addition, such Letter Agreement clarifies the language of paragraph 2.2, “Price Adjustments”.

4.2    Letter Agreement 2497-2R2, entitled “Aircraft Model Substitution,” is hereby deleted in its entirety and replaced with a revised Letter Agreement 2497-2R3, attached hereto, to clarify the language of paragraph 4, “Price, Escalation Adjustments and Advance Payments”.

4.3    Letter Agreement 6-1162-MSA-597R22, entitled “Special Matters,” is hereby deleted in its entirety and replaced with a revised Letter Agreement 6-1162-MSA-597R23, attached hereto, to reflect that such letter agreement does not apply to the 737-990ER Aircraft [***].

4.4    Letter Agreement 6-1162-SCR-124R2, entitled “[***]” is hereby deleted in its entirety and replaced with a revised Letter Agreement 6-1162-SCR-124R3, attached hereto, to reflect the removal of the Subject Aircraft. The parties acknowledge that such Letter Agreement is an Order pursuant to the CSGTA and is described herein for informational purposes.

4.5    Letter Agreement ASA-PA-2497-LA-1208492, entitled “Aircraft Performance Guarantees,” is hereby deleted in its entirety and replaced with a revised Letter Agreement ASA-PA-2497-LA-1208492R1, attached hereto, to identify the applicable 737-990ER Aircraft.

4.6    Letter Agreement ASA-2497-LA-1209641, entitled “Special Matters,” attached hereto, is hereby added to the Purchase Agreement and is applicable to all Aircraft with contract delivery months after December 31, 2012. Notwithstanding the preceding sentence, such Letter Agreement does apply to the 737-990ER Aircraft delivering in [***].

4.7    Letter Agreement ASA-PA-2497-LA-1209478, entitled “737 Production Adjustments,” attached hereto, is hereby added to the Purchase Agreement.

As a result of this Supplemental Agreement, Customer will owe Boeing [***] in advance payments and Boeing will owe Customer a credit memorandum in amount of [***]. Such credit memorandum will reduce the amount of advance payments owed to Boeing upon execution of this Supplemental Agreement and the excess amount of [***] will be applied to Purchase Agreement 3866 between Boeing and Customer dated October 10, 2012. An invoice providing details of the aforementioned advance payments will be provided separately to Customer by Boeing.

The Purchase Agreement will be deemed to be supplemented to the extent herein provided as of the date hereof and as so supplemented will continue in full force and effect.

EXECUTED IN DUPLICATE as of the day and year first written above.

THE BOEING COMPANY        ALASKA AIRLINES, INC.

By:_/s/ Lanine Lange        By:/s/ Mark Eliasen        

Its: Attorney‑In‑Fact        Its: VP/Finance & Treasurer    

This Supplemental Exhibit BFE1 contains vendor selection dates, on-dock dates and other variables applicable to the 737-990ER Aircraft.

1.    Supplier Selection.

Customer will:

1.1     For 737-990ER Aircraft, select and notify Boeing of the suppliers and part numbers of the following BFE items by the following dates:

2.     On-dock Dates

2497-1R19

Alaska Airlines, Inc.

19300 International Blvd.

Seattle, Washington 98188

Subject:    Option Aircraft

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 2497-1R18 dated July 27, 2011. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Boeing agrees to manufacture and sell to Customer additional Model 737-890 aircraft as the Option Aircraft. The delivery months, number of aircraft, Advance Payment Base Price per aircraft and advance payment schedule are listed in Attachment 1 and Attachment 2 to this Letter Agreement. The Airframe Price shown includes the Engine Price.

1.    Aircraft Description and Changes

1.1     Aircraft Description: The Option Aircraft are described by the Detail Specification listed in the Attachments.

1.2    Changes: The Detail Specification will be revised to include:

2.    Price

2.1    The pricing elements of the Option Aircraft are listed in the Attachments 1 and 2 attached hereto.

2.1.1    The [***] New Option Aircraft added to the Purchase Agreement by Supplemental Agreement No. 23 listed in Attachment 2 include escalation factors based on the 2Q 2010 escalation forecast and the resulting advance payment base price and advance payments listed are based on such escalation.

2.1.2    The remaining Option Aircraft listed in Attachment 1 include escalation factors based on the [***] and the resulting advance payment base price and advance payments are based on such escalation.

2.2    Price Adjustments

2.2.1    Optional Features. The price for Optional Features selected for the Option Aircraft will be adjusted to Boeing's [***] as of the date of execution of the definitive agreement for the Option Aircraft. The existing Optional Features amounts shown on Attachments 1 and 2 do not include changes to the Exhibit A incorporated in Supplemental Agreement No. 20 nor do the amounts include Boeing Sky Interior (BSI).

2.2.2    Escalation Adjustments. The Airframe Price and the price of Optional Features for Option Aircraft will be escalated using 1) Boeing’s standard escalation provisions (ECI-W formula) or alternate escalation provisions (ECI-MFG/CPI formula) to be selected by Customer at the date of execution of the definitive agreement for the Option Aircraft, or 2) a mutually agreed different Boeing then current escalation provision should such exist at the date of execution of the definitive agreement for the Option Aircraft. Attachments 1and 2 are shown with the alternate escalation provisions (ECI-MFG/CPI formula). [***].

2.2.3    Base Price Adjustments. The Airframe Price of the Option Aircraft will be adjusted to Boeing’s current price as of the date of execution of the definitive agreement for the Option Aircraft.

2.2.4    [***]

3.    Payment.

3.1    Customer will pay a deposit to Boeing in the amount specified in an Attachment for each Option Aircraft (Deposit), on the date of this Letter Agreement when the particular Option Aircraft was not previously included in an Attachment to an earlier version of this letter and previously paid. If Customer exercises an option the Deposit will be credited against the first advance payment due. If Customer does not exercise an option Boeing will retain the Deposit for that Option Aircraft.

3.2    Following option exercise, advance payments in the amounts and at the times listed in an Attachment will be payable for the Option Aircraft. The remainder of the Aircraft Price for the Option Aircraft will be paid as advance payments and at the time of delivery as provided in the Purchase Agreement.

4.    Option Exercise.

4.1    Customer may exercise an option by giving written notice to Boeing prior to the delivery dates listed in Attachments 1 and 2 (Option Exercise Date) as described in paragraphs 4.3 and 4.4 below.

4.2    If Boeing must make production decisions which are dependent on Customer's exercising an option earlier than the Option Exercise Date, Boeing may accelerate the Option Exercise Date subject to Customer's agreement. If Boeing and Customer fail to agree to a revised Option Exercise Date, either party may terminate the option and Boeing will refund to Customer, without interest, any Deposit and advance payments received by Boeing with respect to the terminated Option Aircraft.

4.3    For Option Aircraft listed on Attachment 1, Customer may (i) exercise its Option, or (ii) exercise its Option and convert an Option Aircraft by providing written notice of its intention to purchase the Option Aircraft, and if applicable, state that it intends to purchase a 737-990ER Substitute Aircraft in substitution for an Option Aircraft:

(a)no later than the first day of the month that is [***] months prior to the scheduled month of delivery of the Option Aircraft set forth in Attachment 1;

(b)any substitution into a Boeing Model 737-990ER aircraft with auxiliary fuel tanks will result in a [***] month slide to delivery; and

(c)any substitution into a Boeing Model 737-990ER aircraft may not later be substituted to any other Boeing Model.

4.4    For Option Aircraft on Attachment 2, Customer may (i) exercise its Option, or (ii) exercise its Option and convert an Option Aircraft by providing written notice of its intention to purchase a 737-990ER Substitute Aircraft in substitution for an Option Aircraft:

(a)no later than the first day of the month that is [***] months prior to the scheduled month of delivery of the Option Aircraft set forth in Attachment 2.

(b)any substitution into a Boeing Model 737-990ER aircraft may not later be substituted to any other Boeing Model.

5.    Contract Terms.

Boeing and Customer will use their best efforts to reach a definitive agreement for the purchase of an Option Aircraft, including the terms and conditions contained in this Letter Agreement, in the Purchase Agreement, and other terms and conditions as may be agreed upon. In the event the parties have not entered into a definitive agreement within 30 days following option exercise, other than as a result of Boeing’s failure to timely provide an agreement to Customer for review and execution, either party may terminate the purchase of such Option Aircraft by giving written notice to the other within 5 days. If Customer and Boeing fail to enter into a definitive agreement containing terms consistent with Purchase Agreement No. 2497 that was delivered to Customer within 20 days following Option exercise due to Customer’s failure or refusal, Boeing will retain the Deposit for that Option Aircraft.

Sincerely,

Attachments

2497-2R3

Alaska Airlines, Inc.

19300 International Blvd.

Seattle, Washington 98188

Subject:    Aircraft Model Substitution

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 2497-2R2 dated July 27, 2011. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

Customer may substitute the purchase of Boeing Model 737-900ER aircraft (Substitute Aircraft) in lieu of any of the 737-890 Aircraft or the [***] Option Aircraft (defined below), subject to the following terms and conditions:

1.    Customer’s Written Notice.

Customer will provide written notice of its intention to substitute the purchase of a Substitute Aircraft in lieu of a 737-890 Aircraft or an [***] Option Aircraft:

(a)     no later than the first day of the month that is [***] months prior to the scheduled month of delivery for the Option Aircraft as reflected (i) on Attachment 1 ([***] Option Aircraft) of Letter Agreement 2497-1, as amended, provide written notice to Boeing of its election to exercise its [***] Option Aircraft and substitute a Substitute Aircraft for the exercised [***] Option Aircraft, or (ii) on Attachment 2 ([***] Option Aircraft) of Letter Agreement 2497-1, as amended, provided that Customer has exercised the [***] Option Aircraft; and

(b)     any substitution into a Boeing Model 737-900ER aircraft with auxiliary tanks may result in a [***] month slide to delivery; and

(c)     any substitution into a Boeing Model 737-900ER aircraft may not later be substituted to any other Boeing Model aircraft.

2.    Boeing’s Production Capability.

Customer’s substitution right is conditioned upon Boeing’s having production capability and the availability for the Substitute Aircraft in the scheduled delivery month of the 737-890 Aircraft or [***] Option Aircraft for which it will be substituted.

If offerable, Boeing will tentatively quote delivery positions for the Substitute Aircraft to allow Customer to secure quotes from Buyer Furnished Equipment vendors, and Boeing to secure quotes from Seller Furnished Equipment vendors which supports the required on-dock dates. If Boeing is unable to manufacture the Substitute Aircraft in the scheduled delivery month of the 737-890 Aircraft or [***] Option Aircraft for which it will be substituted, then Boeing shall promptly make a written offer of an alternate delivery month for Customer’s consideration and written acceptance within thirty (30) days of such offer.

3.    Definitive Agreement.

Customer’s substitution right and Boeing’s obligation in this Letter Agreement are further conditioned upon Customer’s and Boeing’s executing a definitive agreement for the purchase of the Substitute Aircraft within thirty (30) days of (i) Customer’s substitution notice to Boeing or, (ii) if required pursuant to paragraph 2, Customer’s acceptance of an alternate delivery month in accordance with paragraph 2 above.

4.    Price, Escalation Adjustments and Advance Payments.

4.1    Base Price Adjustments. [***]

4.2    Escalation Adjustments. The Airframe Price and the price of Optional Features for Substitute Aircraft will be escalated using 1) Boeing’s standard escalation provisions (ECI-W formula) or alternate escalation provisions (ECI-MFG/CPI formula) to be selected by Customer at the date of execution of the definitive agreement for the Substitution Aircraft, or 2) a different Boeing then current escalation provisions should such exist at the date of execution of the definitive agreement for the Substitution Aircraft. The representative escalation indices and methodology will be used to estimate the Advance Payment Base Prices for Substitution Aircraft.

4.3    [***]

[***]

4.4    Advance Payment Base Price. If the Advance Payment Base Price for any Substitute Aircraft is higher than that of the 737-890 Aircraft or the [***] Option Aircraft, Customer will pay to Boeing the amount of the difference as of the date of execution of the definitive agreement for the Substitute Aircraft. If the Advance Payment Base Price of the Substitute Aircraft is lower than that of the Aircraft, Boeing will retain any excess amounts previously paid by Customer until the next payment is due from Customer, at which point Customer may reduce the amount of such payment by the amount of the excess. In no case will Boeing refund or pay interest on any excess amounts created by virtue of Customer’s exercise of the rights of substitution described in this agreement.

5.    Confidential Treatment.

Customer understands that certain commercial and financial information contained in this Letter Agreement are considered by Boeing as confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of Boeing, disclose this Letter Agreement or any information contained herein to any other person or entity.

Sincerely,

6-1162-MSA-597R23

Alaska Airlines, Inc.

19300 International Blvd.

Seattle, Washington 98188

Subject:    Special Matters

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. This Letter Agreement supersedes and replaces in its entirety Letter Agreement 6-1162-MSA-597R22 dated November 11, 2011. All terms used but not defined in this Letter Agreement have the same meaning as in the Purchase Agreement.

This Letter Agreement does not apply to the 737-990ER Aircraft delivering in December 2012 bearing Manufacturer Serial Number (MSN) 41732 or any other Aircraft or Option Aircraft with a contract delivery month after December 31, 2012.

1.    Basic Credit Memorandum.

Concurrent with the delivery of each Aircraft, Boeing will provide a credit memorandum equal to [***] of the escalated Airframe Price. Customer may apply such credit memorandum to the balance of the Purchase Price due at the time of delivery for such Aircraft, or in payment for Boeing goods and services, but not for advance payment on the Aircraft.

2.    Special Credit Memorandum.

Concurrent with the delivery of each Aircraft, Boeing will provide a credit memorandum equal to [***] of the escalated Airframe Price. Customer may apply such credit memorandum to the balance of the Purchase Price due at the time of delivery for such Aircraft, or in payment for Boeing goods and services, but not for advance payment on the Aircraft.

3.1    Concurrent with the delivery of each of the [***] Aircraft, Boeing will provide a credit memorandum equal to [***] of the escalated Airframe Price. Customer may apply such credit memorandum to the balance of the Purchase Price due at the time of delivery for such Aircraft, or in payment for Boeing goods and services, but not for advance payment on the Aircraft. For subsequent Aircraft [***], this [***] Credit Memorandum shall increase to [***], to be applied as described above.

3.2    Boeing provides this [***] Credit Memorandum, in addition to the other Credit Memoranda of this Letter Agreement, as a financial accommodation to Customer in consideration of Customer becoming the operator of the Aircraft.

3.3    [***]

4.    [***] Credit Memorandum.

Concurrent with the delivery of the [***] 737-990ER Aircraft listed below, Boeing will provide a credit memorandum equal to [***] of the escalated Airframe Price. Customer may apply such credit memorandum to the balance of the Purchase Price due at the time of delivery for such 737-990ER Aircraft, or in payment for Boeing goods and services, but not for advance payment on other 737-990ER Aircraft.

5.    [***] Escalation Factors.

5.1    Table 1 to the Purchase Agreement identifies the delivery positions and the estimated escalation for the Aircraft. The parties agree that escalation factors shall be [***] ([***] Factor) for certain Aircraft ([***] Factor Aircraft). The [***] Factor will be used to determine the escalation adjustment component of the Aircraft Price for each [***] Factor Aircraft notwithstanding any other provisions of the Purchase Agreement to the contrary, including without limitation the provisions of Supplemental Exhibit AE1 to the Purchase Agreement. The applicable [***] Factor Aircraft with the corresponding [***] Factor are as listed in Table 1.

5.2    The Aircraft Price, Basic Credit Memorandum, Special Credit Memorandum and [***] Credit Memorandum for [***] Factor Aircraft entitled to [***] Factor escalation are subject to adjustment per Article 5.3 below. To confirm, [***] Factor is not applicable to Buyer Furnished Equipment and Seller Purchased Equipment.

5.3    In addition, the escalation adjustment for any other sum which is identified in the Purchase Agreement as subject to escalation and which pertains to [***] Factor Aircraft, including but not limited to changes as described in AGTA-ASA Article 3 and Article 4 shall be calculated using the applicable [***] Factor notwithstanding any other provisions of the Purchase Agreement to the contrary, including without limitation the provisions of Supplemental Exhibit AE1 to the Purchase Agreement.

5.4    The process for determining eligibility and adding Aircraft is specified in Letter Agreement 6-1162-MSA-691, as amended, titled Process for Fixing Escalation Factors.

6.    [***] Credit Memorandum.

Concurrent with signing of the Purchase Agreement, Boeing will provide a credit memorandum equal to [***].

7.    July 2005 Delivered Aircraft [***].

Concurrent with delivery of the [***].

8.    [DELETED]

9.    [DELETED]

10.    [***].

Customer and Boeing agree that the commitment [***].

11.    [***].

Customer has previously entered certain 737-890 Aircraft in its fleet into [***] described in detail in letter agreement 6-1162-SCR-124 dated May 2, 2011, as amended. As described in paragraph 6.2 of the aforementioned letter agreement, [***].

12.    [DELETED]

13.    Option Aircraft.

Further to Option Aircraft Letter Agreement 2497-1, as amended, of the Purchase Agreement, Boeing provides the following additional terms for 737-890 option aircraft (Option Aircraft):

13.1    [***]

[***]

13.2    [DELETED]

13.3    Applicable Credit Memorandums.

The Basic, Special and [***] Credit Memorandums described in Articles 1, 2 and 3, above, shall be applicable to the [***]. To confirm, should an Option Aircraft be exercised (whether or not for a Substitute Aircraft), which becomes an Aircraft delivery within the first [***] Aircraft, the [***] will be [***]. For Option Aircraft exercised as Aircraft with delivery after the [***] Aircraft delivery, the [***] will be [***].

13.4    [DELETED]

14.    737 Next Generation Manuals in the SGML Format

In consideration of Customer electing to receive Task Cards for Customer’s fleet of Boeing Model 737-400 aircraft in the SGML format in lieu of the Print File format that Customer currently receives, Boeing will provide the Aircraft Maintenance Manual (AMM) and Fault Isolation/Fault Reporting Manual (FIM/FRM) for Customer’s fleet of Boeing Model 737-700, 737-800 and 737-900 aircraft (the 737 NG aircraft) in the SGML format [***]. Should Customer continue to receive the AMM and FIM/FRM for 737 NG aircraft in the SGML format beyond the date of [***], Customer shall upon such date pay Boeing its [***] for such on-going manuals service.

In recognition that Customer [***] of the AMM and FIM/FRM for its 737 NG aircraft fleet, Boeing, following execution of Revision 15 of this Letter Agreement, [***] in the [***].

15.     INTENTIONALLY LEFT BLANK

16.     737-700 Aircraft.

Customer does not have substitution rights from 737-890 Aircraft to 737-790 aircraft.

17.    [***] Credit Memorandum. 

[***] Customer’s purchase of the Aircraft identified in Supplemental Agreement 29 of the Purchase Agreement [***], upon execution of Supplemental Agreement 29 of the Purchase Agreement. [***].

18.    Assignment.

Unless otherwise described herein, the Credit Memoranda described in this Letter Agreement are provided as a financial accommodation to Customer in consideration of Customer’s becoming the operator of the Aircraft, and cannot be assigned, in whole or in part, without the prior written consent of Boeing.

19.    Confidential Treatment.    

Customer understands that certain commercial and financial information contained in this Letter Agreement is considered by Boeing as confidential. Customer agrees that it will treat this Letter Agreement and the information contained herein as confidential and will not, without the prior written consent of Boeing, disclose this Letter Agreement or any information contained herein to any other person or entity.

Sincerely,

6-1162-SCR-124R3

October 10, 2012

Alaska Airlines, Inc.

19300 Pacific Highway South

Seattle, Washington, 98188

Subject:    Multiple Operating Weight Program – 737-800

2. Letter agreement 6-1162-SCR-119R1 dated May 2, 2011 regarding 737-800 Multiple Operating Weight Program Credit Memorandum (MOW Credit Memo Letter); and

3. Purchase Agreement No. 2497 (the Purchase Agreement) between Boeing and Customer relating to Models 737-890 (737-890 Aircraft) and 737-990ER (737-990ER Aircraft)

This Order incorporates the terms and conditions of the CSGTA. All terms used but not defined in this Order have the same meaning as in the CSGTA. This Order consists of this Letter Agreement and Attachments A and B.

In this Order, the term “Aircraft” means the Model 737-800 aircraft that are listed in Attachment B to this Letter Agreement.

1.    Description of Agreement.

This Order represents the agreement of the parties to the terms and conditions under which Boeing will provide, for the Aircraft, a “Service” as defined in Article 2.22 of the CSGTA. This Service is a [***] Program designed specifically for Customer, as described below (the Program).

2.    Background.

Customer and Boeing previously agreed to enter 737-800 aircraft that were introduced into Customer’s fleet during the five (5) year period commencing in February 2005 into an [***] as documented in paragraph 11 of Special Matters Letter Agreement 6-1162-MSA-597, as amended (Special Matters Letter Agreement). Boeing and Customer acknowledge that fifty-one (51) 737-800 aircraft entered Customer’s fleet between February 2005 and February 2010 (Affected Aircraft), inclusive of leased aircraft. As of May 2, 2011, none of the Affected Aircraft were entered into an MOW program. In order to meet the intent of the Special Matters Letter Agreement, (i) Boeing and Customer agree to enter the Aircraft into the Program and (ii) Boeing agrees to provide Customer a credit memorandum in the amount set forth in paragraph 3 of the MOW Credit Memo Letter relating to the Affected Aircraft. For business reasons, the Aircraft are not identical to the Affected Aircraft in its entirety.

As of revision 1 to this Letter Agreement 6-1162-SCR-124 dated May 24, 2011, the Aircraft included the addition of nine (9) Aircraft that were scheduled to deliver in 2012 through 2015 and reflected the removal of fifteen (15) Affected Aircraft that were previously delivered to Customer, resulting in a total of forty-five (45) Aircraft in the Program that were listed in Attachment B.

As of revision 2 to this Letter Agreement 6-1162-SCR-124, Customer and Boeing acknowledge that three (3) Aircraft of the original forty-five (45) Aircraft were substituted to 737-990ER Aircraft in Supplemental Agreement No. 26 of the Purchase Agreement resulting in a reduction of Aircraft in the Program to forty-two (42) Aircraft as listed in Attachment B.

Through this revision 3 to Letter Agreement 6-112-SCR-124, Customer and Boeing acknowledge that [***] Aircraft are substituted to 737-900ER Aircraft in Supplemental Agreement No. 29 of the Purchase Agreement resulting in a reduction of the Aircraft in the Program to [***] Aircraft as listed in Attachment B, a copy of which is attached hereto.

3.    [***].

Customer has selected the three (3) notional placard [***] for the Program. The highest [***] selected by the Customer is [***] pounds which will be set forth in the Airplane Flight Manual (AFM)* of all [***] Aircraft listed in Attachment B. The two (2) alternative [***] selected for the purposes of the Program are [***] pounds and [***] pounds.

The [***] (defined in Attachment A) for the first year of utilization of the Program is [***] pounds and will be reconciled annually as set forth in Article 7 below.

4.    Administrative Fee.

Boeing will charge the administrative fee relating to the Program in the amount of [***]in July 2004 dollars. [***].

5.    Delivery of Airplane Flight Manuals.

Shipment of the revised AFM, if applicable, will occur within sixty (60) days of the date of this Order.

6.    Aircraft Included in the Program.

6.1    Included Aircraft.

Attachment B specifies all of the Aircraft included in the Program. Boeing and Customer agree that no additional 737-800 aircraft in Customer’s fleet will be added to the Program. The configuration of the [***] Aircraft set forth in Exhibit A to the purchase agreement for the Aircraft to be delivered to Customer after the date of this Letter Agreement will reflect the highest of the three selected [***] in the AFM. Accordingly, the Basic Price and the Advance Payment Base Price of each [***] Aircraft will be based upon the highest of the three selected [***] in the AFM.

6.2    Invoice for [***] Aircraft.

For the avoidance of doubt, Customer agrees to [***] pounds for all the Aircraft scheduled for delivery in [***] and Customer acknowledges that the credit amount provided in the [***] is based on such [***]. In the event Customer does not purchase [***] pounds for the [***] Aircraft deliveries, then Customer and Boeing agree to work together in good faith to reach an equitable adjustment for the difference between the [***] Aircraft when such actual [***].

By accepting the [***] Credit Memo, Customer agrees that it has received full credit / price adjustment for the difference between the [***] relating to the Affected Aircraft. Therefore, Customer acknowledges that it will not receive an incremental credit memorandum at delivery of the [***] Aircraft, for the difference between [***] of such Aircraft.

7.    [***]

The [***] and actual [***] - defined in Attachment A) will be jointly analyzed by the assigned Boeing Regional Director, Marketing and Customer. The [***] will be determined by the percent distribution of [***] calculated as a function of revenue flight frequencies and weighted by block hours.

One year after the date of this Letter Agreement, and thereafter on an annual basis, Customer, through a knowledgeable representative, will furnish to Boeing an [***] report of Customer which reports the actual [***] Aircraft, to determine the basis of any additional billing. The criteria for billing are as follows:

For each [***] Aircraft where [***], Customer will pay Boeing’s then current price per [***] for the difference between [***].

Except as otherwise provided in this Letter Agreement, no refund or credit will be given to Customer for [***] purchased or leased pursuant to this Letter Agreement.

After the initial 12 month period the previous [***] for the prior year may become the new [***] for the next year unless Customer is expected to have significant changes in the operation of the Aircraft in which case, a new [***] will be calculated. [***] is decided by the mutual agreement of the Customer and the Regional Director, Marketing based upon the best data available. If the new [***] is significantly greater ([***] or greater on a per aircraft basis), Customer will purchase or lease the additional increment of [***], as the case may be.

At the time of reconciliation of the [***] report, Customer may elect to have the selected [***] in the AFM changed for all [***] Aircraft. In which case, the Customer would be [***].

8.    Protection of Residual Value.

As long as the Aircraft are in the legal possession of Customer and Customer has made all requisite payments or is not otherwise in default under the Program, the Aircraft may be operated by Customer with the AFM provided by Boeing pursuant to this Program. In other words, Customer may sell and lease-back an Aircraft without affecting its inclusion in the Program.

In the event Customer intends to sell or lease to a third party, or otherwise dispose of an Aircraft owned by Customer (Disposed Aircraft), Customer will give written notice to Boeing of such intent as soon as practicable but in any event at least [***] prior to its disposal. For all such Aircraft the AFM will be changed by Boeing to a [***] which will be the [***] paid for at delivery or, for Aircraft in the Program through execution of this letter, the then current [***]. However, if an Aircraft which was in the Program at one time returns to Customer’s fleet after being leased to a third party, such Aircraft may be reinstated in the Program at Customer’s election.

If Customer desires to sell or lease a Disposed Aircraft certified to [***], then Customer may purchase, at Boeing’s then current price for [***], the difference in [***] above what the Customer has previously paid for [***] desired for a Disposed Aircraft. The AFM will be furnished in the single higher [***].

It is understood that a minimum of [***] will be required for Boeing to make the change to the FAA approved AFM elected by Customer. If the Customer requires the AFM to be prepared in a different format required by the cognizant aviation regulatory authority of the proposed third party purchaser or lessee, prior coordination with Boeing will be required to determine price and offerability.

9.    Default.

Failure of Customer to furnish the [***] report as required or failure to pay any additional billing made as a consequence of an annual reconciliation within 30 calendar days of receipt are each Events of Default under the Program. Upon the occurrence of any Event of Default and at any time thereafter as long as the Event of Default is continuing, Boeing may exercise one or more of the following remedies. Boeing may apply any outstanding credit memoranda against billings due but unpaid for more than 30 days and may terminate the Program by notice given to Customer in accordance with Article 12 below.

In the event of termination by Boeing as a consequence of an Event of Default, Boeing will furnish to Customer the same AFM as that provided for a Disposed Aircraft as discussed in paragraph 8 above. Boeing will also notify the cognizant aviation regulatory authorities of the revised AFM and [***].

10.    Term of the Program.

This Program will continue, unless terminated by Boeing under Article 9 above or by the mutual agreement of the parties, for as long as Customer remains in legal possession of the Aircraft subject to this Program. The Aircraft in the Program are identified in Attachment B to this Letter Agreement.

11.    Amendments to Order.

This Order will be amended by the parties to document (i) the deletion of Aircraft to this Program, (ii) changes to any of the [***] in the AFM and the corresponding Placards, (iii) the purchase or lease of any additional [***] as a consequence of an annual reconciliation, (iv) the resetting of [***] if required as a consequence of annual reconciliation, or (v) termination of the Program.

12.    Notices.

The [***] reported annually and the notices related to the sale, lease or other disposition of Aircraft subject to this Program will be addressed as follows:

        

        

13.    Performance Guarantees.

Boeing will not be required to furnish multiple performance guarantees for the Aircraft.

14.    Exclusivity.

This Program is designed exclusively for Customer and may not be assigned without the prior written consent of Boeing.

15.    Confidentiality.

The terms and conditions of this Order and the reports required hereunder shall be considered to be confidential and shall not be disclosed by either party (except as reasonably necessary to its respective employees, insurers, auditors or professional advisors) without the prior written consent of the other party.

Please indicate your acceptance of this Order by returning one (1) executed copy to the attention of the undersigned.

Very Truly Yours,

Customer’s Purchase Order Number:

Attachments

ASA-PA-2497-LA-1208492R1

Alaska Airlines, Inc.

19300 International Blvd.

Seattle, Washington, 98188

This letter agreement (Letter Agreement) amends and supplements the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement.

For the purposes of this Letter Agreement, Aircraft is defined to be the following:

Boeing agrees to provide Customer with the performance guarantees in the Attachment. These guarantees are exclusive and expire upon delivery of the Aircraft (as defined below) to Customer. Customer agrees to limit the remedy for non-compliance of any performance guarantee to the terms in Letter Agreement No. 6-1162-SCR-111R1, as amended.

1.    Assignment.

Notwithstanding any other provisions of the Purchase Agreement, the rights and obligations described in this Letter Agreement are provided to Customer in consideration of Customer’s becoming the operator of the Aircraft and cannot be assigned in whole or, in part.

2.    Confidential Treatment.

The information contained herein represents confidential business information and has value precisely because it is not available generally or to other parties. Customer will limit the disclosure of its contents to employees of Customer with a need to know the contents for purposes of helping Customer perform its obligations under the Purchase Agreement and who understand they are not to disclose its contents to any other person or entity without the prior written consent of Boeing.

Very truly yours,

The Operational Empty Weight (OEW) derived in Paragraph 2.3.3 is the basis for the mission guarantee of Paragraph 2.3.1.