On January 31, 2000, the aircraft operating the route, a McDonnell Douglas MD-83, crashed into the Pacific Ocean roughly 2.7 miles (4.3 km; 2.3 nmi) north of Anacapa Island, California, following a catastrophic loss of pitch control.

The probable cause was stated to be "a loss of airplane pitch control resulting from the in-flight failure of the horizontal stabilizer trim system jackscrew assembly's Acme nut threads.

[6]: 11  Thompson had flown for Alaska Airlines for 18 years and Tansky for 15; neither pilot had been involved in an accident or incident prior to the crash.

[6] Both pilots lived in Greater Los Angeles area and had previous military experience — Thompson in the U.S. Air Force and Tansky in the U.S.

[12] At least 35 occupants of Flight 261 were connected in some manner with Alaska Airlines or its sister carrier Horizon Air, including 12 people directly employed by the company.

At their cruising altitude and speed, the position of the jammed stabilizer required the pilots to pull on their yokes with about 10 lbf (44 N) of force to keep level.

Cockpit voice recorder (CVR) transcripts indicate that the dispatcher was concerned about the effect on the schedule ("flow"), should the flight divert.

After the flight crew stated their intention to land at LAX, ATC asked whether they wanted to proceed to a lower altitude in preparation for the approach.

[6]: 9  The crippled plane had been given a block altitude,[20] and several aircraft in the vicinity had been alerted by ATC to maintain visual contact with the stricken jet.

A few seconds before 16:21 (00:21 UTC),[6] Flight 261 hit the Pacific Ocean at high speed between the coastal city of Port Hueneme, California, and Anacapa Island.

[23] Using side-scan sonar, remotely operated vehicles, and a commercial fishing trawler, workers recovered about 85% of the fuselage (including the tail section) and a majority of the wing components.

All wreckage recovered from the crash site was unloaded at the Seabees' Naval Construction Battalion Center Port Hueneme, California, for examination and documentation by NTSB investigators.

[6][25] The later analysis estimated that 90% of the thread in the acme nut had already worn away previously and that it had finally stripped out during the flight while en route to San Francisco.

This and other evidence suggested to the NTSB that "the SFO mechanic who was responsible for lubricating the jackscrew assembly in September 1999 did not adequately perform the task."

Laboratory tests indicated that the excessive wear of the jackscrew assembly could not have accumulated in just the four-month period between the September 1999 maintenance and the accident flight.

[6] Between 1985 and 1996, Alaska Airlines progressively increased the period between both jackscrew lubrication and end-play checks, with the approval of the Federal Aviation Administration (FAA).

In the case of extended lubrication intervals, the investigation could not determine what information, if any, was presented by Alaska Airlines to the FAA prior to 1996.

The NTSB noted that in July 2001, an FAA panel determined that Alaska Airlines had corrected the previously identified deficiencies.

The aircraft designers assumed that at least one set of threads would always be present to carry the loads placed on it; therefore, the effects of catastrophic failure of this system were not considered, and no "fail-safe" provisions were needed.

The NTSB determined that the design of "the horizontal stabilizer jackscrew assembly did not account for the loss of the acme-nut threads as a catastrophic single-point failure mode".

The crash of AS261 became a part of the federal investigation against Alaska Airlines, because, in 1997, Liotine had recommended that the jackscrew and gimbal nut of the accident aircraft be replaced, but had been overruled by another supervisor.

Around that time, Alaska Airlines agreed to settle the libel suit by paying about $500,000; as part of the settlement, Liotine resigned.

Also included was a recommendation that pilots were to be instructed that in the event of a flight-control system malfunction, they should not attempt corrective procedures beyond those specified in the checklist procedures, and in particular, in the event of a horizontal stabilizer trim-control system malfunction, the primary and alternate trim motors should not be activated, and if unable to correct the problem through the checklists, they should land at the nearest suitable airport.

Alaska Airlines' maintenance and inspection of its horizontal stabilizer activation system were poorly conceived and woefully executed.

[31] Steve Miletich of The Seattle Times wrote that the western portion of Washington, "had never before experienced such a loss from a plane crash".

[32] Both Boeing (who had acquired McDonnell Douglas through a merger in 1997) and Alaska Airlines eventually accepted liability for the crash, and all but one of the lawsuits brought by surviving family members were settled out of court before going to trial.

[33] While the financial terms of settlements had not been officially disclosed, The Seattle Times reported the total amount to be in excess of US$300 million, covered entirely by insurance.

Captain Thompson and First Officer Tansky were both posthumously awarded the Air Line Pilots Association Gold Medal for Heroism, in recognition of their actions during the emergency.

[40]The victims' families approved the construction of a memorial sundial, designed by Santa Barbara artist James "Bud" Bottoms, which was placed at Port Hueneme on the California coast.

[49] Two victims were falsely named in paternity suits as the fathers of children in Guatemala in an attempt to gain insurance and settlement money.