Airtran 2002 Annual Report Download

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K E E P S T H I N G S P R O F I TA B L E .

Table of contents

  • Page 1
    K E E P S T H I N G S P R O F I TA B L E .

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    KEEPING THINGS SIMPLE

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    ... do as a company is carefully calculated to get the job done right, but to waste absolutely nothing along the way. It's a philosophy that has a pretty amazing effect on the bottom line. And it's the reason AirTran Airways maintains some KEEPING THINGS EFFICIENT of the lowest operating costs in the...

  • Page 6
    ... for new and better ways to safely transport passengers and run our business. By year's end, more than 56% of our flights were being booked online by our customers, which is the most profitable way for an airline to sell tickets. We were also the first low-fare airline to introduce online check-in...

  • Page 7
    K E E P I N G T H I N G S I N N O VAT I V E

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    ... 2002, we seized growth opportunities and KEEPING THINGS FOCUSED expanded our services while most other airlines cut back. Our commitment to Caring Customer Service and competitive, affordable pricing has made AirTran Airways an unbeatable value in the marketplace. Suddenly, it's our business model...

  • Page 10
    ... be around AirTran Airways long before you realize that our Crew Members love what they do. We strongly believe in providing more than just a job to our people. We launched a telecommuting program that allows our Customer Relations Agents to work from home. We strive to help our Crew Members balance...

  • Page 11
    KEEPING THINGS FUN

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    Lo . r Fn o rro n a ro Robert F a President and Chief Operating Officer

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    ..., Milwaukee, West Palm Beach and Kansas City. We also KEEPING THINGS GROWING expanded service to many of our existing routes. We hired close to five hundred new Crew Members and added twenty Boeing 717s to our fleet. Entrepreneur Magazine even named us Best Low-Fare Airline for the third time...

  • Page 14
    ... airline to serve Vanilla Coke â„¢ on our flights. We introduced AirPath wireless internet service, won the Onboard Services Award for our new uniforms and streamlined our A-Plus Rewards travel program. We also launched the AirTran Airways Visa â„¢ card that makes it even easier for loyal customers...

  • Page 15
    KEEPING THINGS FRESH

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  • Page 17
    ... barriers throughout this industry and changing the way airlines make money. We'll add 43 new Boeing 717s to our fleet in just twenty-four months, something no other KEEPING THINGS MOVING airline has been able to do. In 2003, we'll launch a bold new advertising campaign tagged "Go. There's Nothing...

  • Page 18
    J o e L e o n a rd Chairman and Chief Executive Officer

  • Page 19
    ... many did not. We achieved a net of $10.7 million from operating revenues of $733.4 million. We flew 5.6 billion revenue passenger miles (RPMs) in 2002-a 24% increase over 2001. And our capacity grew 26%, to 8.3 billion available seat miles (ASMs) resulting in a year-end load factor of 67.6%. Our...

  • Page 20
    ... service with assigned seating, our passengers decide what class best fits their needs-not the other way around. Those who fly AirTran Airways are enjoying the space our aircraft provide, with an 83% capacity needed before someone gets a middle seat. Our Boeing 717 aircraft provide 100% fresh-air...

  • Page 21
    future remains ours to determine. You will notice that in this report, we have dramatically highlighted our financial results. The past twelve months have been rewarding and exhilarating at AirTran Airways. We hope you share that excitement about your airline and the opportunities that lie ahead. ...

  • Page 22
    ... AirTran Airways strategically expanded into new markets and sustained promising, ambitious growth. We reduced our operating CASM to 8.51 cents (excluding special items) while growing capacity (ASMs) by 26% and revenue passenger miles (RPMs) by 24%. As a company, we feel confident 20 70 60 Aircraft...

  • Page 23
    ... per share data) Operating revenues Net income (loss) Earnings (loss) per common share: Basic Diluted Total assets at year-end Long-term debt obligations including current maturities at year-end Operating Data: Revenue passengers Revenue passenger miles (RPM) (000s)(5) Available seat miles (ASM...

  • Page 24
    ... at Hartsfield Atlanta International Airport. • Transacted more than 56 percent of our bookings via the Internet. • Upgraded features on airtran.com including seat assignments on select fares. Looking forward to 2003, we expect operating revenues to grow as we increase available seat mile (ASM...

  • Page 25
    ... Debt discount amortization (see Note 7) - 4,291 Government grant (see Note 3) (640) (28,951) Adjusted net income, excluding special items (non-GAAP) $10,105 $ 21,146 Net income (loss) per share, basic, as reported $ 0.15 $ (0.04) Reduction of B737 and DC-9 fleet values and lease termination charges...

  • Page 26
    ... our B717 aircraft fleet and new destinations added to our route system, as well as contractual wage increases and higher costs associated with our employee benefit programs. We employed approximately 5,000 employees (including approximately 4,700 full-time equivalents) at year-end 2002 representing...

  • Page 27
    ... $4.3 million of the debt discount associated with this financial instrument. Interest income decreased due to lower interest rates earned on invested cash balances. SFAS 133 adjustment income represents changes in the value of our now terminated fuel-related derivative contracts (see Note 5 to...

  • Page 28
    ... Aircraft rent Depreciation Other operating Total CASM (1) CASM figures above were adjusted to exclude the following special items: Impairment loss/lease termination of $46.1 million, special charges of $2.5 million and a government grant of $29.0 million. Salaries, wages and benefits increased...

  • Page 29
    ...of cash temporarily withheld by our credit card processors related to our customers' advance payments for future travel. Investing activities provided cash flows of $7.6 million in 2002 compared to cash flows used of $31.2 million in 2001. Our property and equipment purchases in both years primarily...

  • Page 30
    EETC-financed B717s were delivered in 1999, and the remaining two deliveries occurred in 2000. During 2000, we sold and leased back two of the EETC-financed B717s in a leveraged lease transaction reducing the outstanding principal amount of the EETCs by $35.9 million. 9

  • Page 31
    ...of all of our rights under the B717 aircraft purchase agreement with the McDonnell Douglas Corporation (an affiliate of Boeing Capital) and (ii) a subordinated lien on the collateral securing the new senior secured notes. Critical Accounting Policies and Estimates General The discussion and analysis...

  • Page 32
    ..., wages and benefits Aircraft fuel Maintenance, materials and repairs Distribution Landing fees and other rents Aircraft insurance and security services Marketing and advertising Aircraft rent Depreciation Other operating Impairment loss/lease termination Special charges Government grant Total...

  • Page 33
    ... and Equipment: Flight equipment Less: Accumulated depreciation Purchase deposits for flight equipment Other property and equipment Less: Accumulated depreciation Total property and equipment Other Assets: Intangibles resulting from business acquisition Trademarks and trade names Debt issuance costs...

  • Page 34
    AirTran Holdings, Inc. Consolidated Balance Sheets (continued) (In thousands, except per share data) December 31, Liabilities and Stockholders' Equity Current Liabilities: Accounts payable Accrued and other liabilities Air traffic liability Current portion of long-term debt Total current liabilities...

  • Page 35
    ... loss Balance at December 31, 2001 Issuance of common stock for exercise of options Issuance of common stock under stock purchase plan Net income Other comprehensive income Total comprehensive income Balance at December 31, 2002 See accompanying notes to consolidated financial statements...

  • Page 36
    ... for aircraft purchases Proceeds from disposal of equipment Net cash provided by (used for) investing activities Financing activities: Issuance of long-term debt Debt issuance costs Payments of long-term debt Proceeds from sale of common stock Net cash used for financing activities Net increase in...

  • Page 37
    .... AirTran Airways, Inc. (Airways) offers scheduled air transportation of passengers and mail, serving short-haul markets primarily in the eastern United States. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted...

  • Page 38
    ... cost of providing free travel for awards earned under our A+ Rewards Program. Stock-Based Compensation We grant stock options for a fixed number of shares to our officers, directors, key employees and consultants. We account for stock option grants in accordance with Accounting Principles Board...

  • Page 39
    ...Charges Related to Terrorist Attacks On September 11, 2001, terrorists hijacked and used four aircraft in terrorist attacks on the United States (the September 11 Events). As a result of the September 11 Events, the Federal Aviation Administration immediately suspended all commercial airline flights...

  • Page 40
    ... 2003 at a price no higher than $0.74 per gallon of aviation fuel, including delivery to our operations hub in Atlanta and other locations. During the first quarter of 2003, we entered into additional fuel cap contracts. These new contracts increased our total future fuel purchase commitments to...

  • Page 41
    ... secured notes of AirTran Airways, Inc. due 2008 13.00% Subordinated notes of AirTran Holdings, Inc. due 2009 7.75% Convertible notes of AirTran Holdings, Inc. due 2009 $166,400 17,500 17,500 $201,400 Under the new senior secured notes issued by our operating subsidiary, Airways, principal payments...

  • Page 42
    ... Statements of Operations as "Other (Income) Expense - Convertible debt discount amortization." The subordinated notes and convertible notes are secured by: (i) a pledge of all of our rights under the B717 aircraft purchase agreement with the McDonnell Douglas Corporation (an affiliate of Boeing...

  • Page 43
    ... weighted-average shares outstanding used in computing diluted earnings (loss) per common share. 11. Stock Option Plans The 1993 Incentive Stock Option Plan provides up to 4.8 million options to be granted to officers, directors and key employees to purchase shares of common stock at prices not less...

  • Page 44
    ... Canceled Balance at December 31, 2002 Exercisable at December 31, 2002 In addition to the above, 500 common stock awards were granted under the stock option plans and concurrently exercised. The following table summarizes information concerning currently outstanding and exercisable options: Options...

  • Page 45
    ... of the change in the first quarter of 2002. For financial reporting purposes, a valuation allowance has been recognized at December 31, 2002 and 2001, to reduce the net deferred income tax assets to zero. We have not recognized any benefit from the future use of NOL carryforwards because management...

  • Page 46
    ... our 1995 Employee Stock Purchase Plan, employees who complete 12 months of service are eligible to make periodic purchases of our common stock at up to a 15 percent discount from the market value on the offering date. The Board of Directors determines the discount rate, which was increased to 10...

  • Page 47
    ... The results of the first quarter of 2002 included a credit of $5.6 million resulting from a favorable change in fair value of the company's fuel-related derivative instruments. During the fourth quarter of 2002 and 2001, year-end adjustments resulted in increasing income or increasing loss before...

  • Page 48
    ... results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation...

  • Page 49
    ... made with the Securities and Exchange Commission are available free of charge on our website, airtran.com, or upon request by writing: AirTran Holdings, Inc. Attn: Investor Relations 9955 AirTran Blvd. Orlando, FL 32827 Corporate Governance Copies of our Corporate Governance Guidelines and charters...

  • Page 50
    ...Tampa New Orleans Orlando Effective June 11, 2003 AirTran JetConnect service provided by Air Wisconsin Airlines Corporation. Service to Las Vegas and Los Angeles provided by Ryan International Airlines. Routes and schedules subject to change without notice. ©AirTran Airways 2003 AirTran Airways...

  • Page 51
    AirTran Holdings, Inc. Ã...nnual Report 2002