Airtran 2007 Annual Report Download - page 34

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Aircraft rent decreased 11.6 percent on a cost per ASM basis. Since December 31, 2006, we have taken delivery of ten B737 aircraft.
As a result, our capacity, as measured by ASMs, increased 19.4 percent. However, of the ten aircraft we have taken delivery of since
December 31, 2006, none were leased. As a result, aircraft rent expense increased only 5.2 percent from 2006 to 2007.
Marketing and advertising costs decreased 25.0 percent on a cost per ASM basis, primarily due to a reduction in promotional costs.
Aircraft insurance and security services decreased 28.6 percent on a cost per ASM basis. While the addition of ten new Boeing
aircraft to our fleet during the year ended December 31, 2007 increased our total insured hull value and related insurance premiums,
the decrease on a cost per ASM basis is primarily due to a reduction in hull and liability negotiated insurance rates for our 2007 fleet
coverage.
Depreciation increased 31.3 percent on a cost per ASM basis, primarily due to the addition of ten owned B737 for the year ended
December 31, 2007 as well as the purchase of spare aircraft parts for the B737 fleet.
Other operating expense increased 6.0 percent on a cost per ASM basis. The increase is attributable in large part to increased ground
handling services, contracted services, and de-icing operations.
Other (Income) Expense
Other (income) expense, net increased by $34.4 million. Interest income decreased by $1.3 million. Interest expense, including
amortization of debt issuance costs, increased by $24.7 million primarily due to the effect of aircraft debt financings entered into
during 2006 and 2007. Capitalized interest decreased by $3.7 million due to fewer future aircraft deliveries resulting in lower pre
delivery deposits (PDPs). Capitalized interest represents the interest cost to finance purchase deposits for future aircraft. These
amounts are classified as part of the cost of the aircraft upon delivery.
Net unrealized (gains) losses on derivative financial instruments in 2007 were $0.3 million. The net unrealized (gains) losses are
attributable to the net of $2.9 million of unrealized losses on interest rate swap arrangements and $2.6 million of unrealized gains on
fuel related derivatives.
In April 2007, we took delivery of and in May 2007, we subsequently sold two aircraft and recognized a gain of $6.2 million related to
the sale of these two aircraft.
On January 11, 2007, we commenced an exchange offer for all of the outstanding shares of Midwest Air Group (Midwest). On
August 12, 2007, we announced that our exchange offer for all of the outstanding shares of Midwest had terminated and on August 17,
2007, we announced that we had terminated all our efforts to acquire Midwest in a negotiated transaction. As of September 30, 2007,
costs associated with the proposed acquisition, including the exchange offer, were $10.7 million, and consisted primarily of fees for
attorneys, accountants, investment bankers, travel and other related costs. All costs related to the proposed acquisition were charged to
Other (income) expense during the three months ended September 30, 2007.
Income Tax Expense
Our effective income tax rate was 39.7 percent and 40.3 percent for the years ended December 31, 2007 and 2006, respectively.