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2008
AIRTRAN HOLDINGS, INC. ANNUAL REPORT TO SHAREHOLDERS

Table of contents

  • Page 1
    AIRTRAN HOLDINGS, INC. ANNUAL REPORT TO SHAREHOLDERS 2008

  • Page 2
    ... : AirTran Holdings, Inc. • Attention : Investor Relations • 9955 AirTran Blvd. • Orlando, FL 32827. CORPORATE GOVERNANCE : On June 30, 2008, Bob Fornaro, Chairman, President & Chief Executive Officer, submitted to the New York Stock Exchange the Annual CEO Certification required by the rules...

  • Page 3
    ...AirTran Boulevard Orlando, Florida 32827 (Address, including zip code, of registrant's principal executive offices) (407) 318-5600 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value (Title of class) Securities...

  • Page 4
    ...defined in Rule 12b-2 of the Exchange Act). Yes Â... No _ The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2008, was approximately $240 million (based on the last reported sale price on the New York Stock Exchange on that date). The number of shares...

  • Page 5
    ... BY REFERENCE Portions of the proxy statement, to be used in connection with the solicitation of proxies to be voted at the registrant's annual meeting of stockholders to be held on May 20, 2009 and to be filed with the Commission, are incorporated by reference into this Report on Form 10-K.

  • Page 6

  • Page 7
    ... and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Exhibits and Financial Statement Schedule...

  • Page 8
    ...All forward-looking statements included in this report are based on information available to us on the date specified or if no date is specified, then as of the date of this report. It is routine for our internal projections and expectations to change as the year or each quarter in the year progress...

  • Page 9
    ...the lowest non-fuel unit operating costs among United States major airlines on an aircraft stage length adjusted basis. We use our low cost advantage to provide value to both business and leisure customers. Our principal executive offices are located at 9955 AirTran Boulevard, Orlando, Florida 32827...

  • Page 10
    ...A2B® corporate travel program • AirTran U® student travel program • AirTran Airways co-branded credit card Through the AirTran Airways experience, we have created an air travel product with broad appeal which generates a growing number of repeat customers. We believe our comparatively low-cost...

  • Page 11
    ...Web site is designed to sell tickets efficiently. We continue to add functionality to http://www.airtran.com that allows customers to easily book and manage their travel including the ability to retrieve and change future flight reservations, make seat selection and check-in online. We also launched...

  • Page 12
    ...two aircraft types from a single manufacturer as well as enhanced efficiencies from the increased number of new modern B737 aircraft in our fleet. We reduced our average non-fuel operating costs per available seat mile for each of the six years in the 2002 to 2007 period. During 2008, we managed our...

  • Page 13
    ... low cost structure, friendly service, competitive fares, and strong route network anchored by our hub at Hartsfield-Jackson Atlanta International Airport. We believe that our brand and our presence in Baltimore/Washington, Milwaukee, Orlando, and a number of other Florida markets augment operations...

  • Page 14
    ... interline ticketing and baggage agreements with various airlines which can increase our revenue opportunities and assist us with accommodating passengers during irregular operations. In the future, we may add new markets to our existing routes and/or additional service between cities that...

  • Page 15
    ... Business Class upgrades when purchasing certain fares. In contrast to other low cost airlines, we offer our customers the ability to select seats in advance. Full fare passengers, A+ Reward Elite members, and members of our A2B Corporate travel program, many of whom tend to purchase tickets...

  • Page 16
    .... These systems provide flight schedules and pricing information and allow travel agents to electronically book a flight reservation without contacting our reservations facility. We pay booking fees for the completed transactions made in the GDS systems. We also participate with a number of emerging...

  • Page 17
    ... and/or working condition demands that could impact operating performance and expenses. Fuel Aircraft fuel is our largest expenditure and accounted for 45.5 percent, 37.1 percent and 36.5 percent of our 2008, 2007, and 2006 operating expenses, respectively. Increases in fuel prices or a shortage...

  • Page 18
    ...at the ticket counter, gate and baggage service office) and under-wing services combined. Using our employees, we conduct complete ground handling services at 32 airports, including Atlanta. At other airports, the operations not conducted by our employees are contracted to other air carriers, ground...

  • Page 19
    ...number of airports. In January 2008, the FAA issued an order limiting the number of scheduled flight operations at New York's John F. Kennedy International Airport (JFK); in the same month the DOT issued a notice of proposed amendment to its Airport Rates and Charges policy that would allow airports...

  • Page 20
    ... TSA was granted authority to impose additional fees on air carriers if necessary to cover additional federal aviation security costs. Pursuant to its authority, the TSA may revise the way it assesses this fee, which could result in increased costs for passengers and/or us. We cannot forecast what...

  • Page 21
    ... in fuel prices may have an adverse effect on our financial condition, results of operations, or liquidity. It is impossible to predict reliably the future price of or the volatility of aircraft fuel. Political disruptions or wars involving oil-producing countries, changes in governmental policy...

  • Page 22
    ... the use of cash in connection with work force reductions or early termination fees in connection with aircraft lease terminations. At certain fuel price levels, our current and potential cost structure-even with full implementation of our business plan-may preclude our ability to operate profitably...

  • Page 23
    ... in our credit ratings could further increase our borrowing costs, subject us to more onerous terms, and reduce our borrowing flexibility in the future. Such limitations on our financing options may affect our ability to fund major new acquisitions or capital-intensive internal initiatives. In...

  • Page 24
    ...to changes in fuel costs, high fuel prices or a worsening economic environment. The inability to maintain our existing credit card processing agreement with our largest credit card processor would have a material adverse effect on our business. The number of credit card processors providing services...

  • Page 25
    ... air travel. Accordingly, the second quarter tends to be our strongest revenue quarter. In light of economic conditions and rapidly changing network operations and travel pricing in our industry, we cannot predicate whether demand for air travel either for the industry in general, or AirTran Airways...

  • Page 26
    ... and market industry conditions because any related decrease in revenues could cause us to not have sufficient cash flows from operations to make our scheduled debt payments; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and...

  • Page 27
    ... government policy concerning the production, transportation, or marketing of aircraft fuel, changes in aircraft fuel production capacity, environmental concerns and other unpredictable events may result in fuel supply shortages in the future. Adverse changes in the availability of, or increases in...

  • Page 28
    ... adjust our fare levels, fluctuations in the market prices of jet fuel will have the effect of reducing or increasing the amount of profit we earn or loss we incur. Conversely, by entering into hedging contracts, we may, in exchange for minimizing the risk of potential cost increases associated with...

  • Page 29
    ... benefits or exemptions would be available to us or at all based on our status as a low cost carrier, as a new market entrant in a particular market or based on our rate of growth. We rely heavily on technology and automated systems to operate our business, and a failure of these technologies...

  • Page 30
    ... when any such reductions might be implemented, if at all. We intend to continue to review staffing levels for all other work groups to align staffing with the level of future operations. If fuel prices increase materially from current levels, we may need to effect additional reductions in our...

  • Page 31
    ..., de-icing and certain other services. Complete ground handling consists of public contact (at the ticket counter, gate and baggage service office) and under-wing services combined. Operations not conducted by our employees are contracted to other air carriers, ground handling companies, or fixed...

  • Page 32
    ... and seasonal variations in airline travel, which cause results to fluctuate. Our operations will continue to be vulnerable to weather conditions in different parts of our network that could disrupt service, create air traffic control problems, decrease revenue and increase costs, such as during...

  • Page 33
    ... and/or transfer of airline routes or takeoff and landing slots. Also, the availability of international routes to United States carriers is regulated by treaties and related agreements between the United States and foreign governments that may be amended from time to time, or because appropriate...

  • Page 34
    ...on our business. We will need to attract and retain additional qualified personnel and develop, train and manage an increasing number of management-level employees. We cannot assure you that we will be able to attract and retain personnel as needed in the future. We may not realize the full value of...

  • Page 35
    ... the market price of our common stock relative to the net book value per share of our common stock. As a result of this impairment testing, we recorded goodwill impairment charges of approximately $8.4 million in 2008. We performed the annual impairment test of the financial statement carrying value...

  • Page 36
    ... half of 2008, the air carrier industry and the securities markets generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. This was initially triggered by rapid and all time high fuel prices and general...

  • Page 37
    ... to our future financial performance or changes in financial estimates of securities analysts; • success of our operating, growth and high priced fuel strategies; • investor anticipation of competitive and industry threats, whether or not warranted by actual events; • operating and stock price...

  • Page 38
    .... We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock or the value of the Notes. The price of our common stock could be affected by possible sales of our common stock by investors who view the Notes...

  • Page 39
    ... 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES Operating Aircraft Fleet We operated the following owned and leased aircraft as of December 31, 2008: WeightedAverage Age (Years) 7.3 2.7 5.6 Aircraft Type B717 B737 Total Number of Passenger Seats 117 137 Owned 8 28 36 Leased 78 22 100...

  • Page 40
    ...airlines. Our principal corporate offices are located at the Orlando International Airport in a leased facility. The facility houses our executive offices as well as our operations staff, general administrative staff, and some of our computer systems. We have a 15-year lease with the Orlando Airport...

  • Page 41
    ... EQUITY SECURITIES Market Information Our common stock, $.001 par value per share, is traded on the New York Stock Exchange under the symbol "AAI." The following table sets forth the reported high and low sale prices for our common stock for each quarterly period during 2008 and 2007: 2008 High Low...

  • Page 42
    ... stage length (miles) (10) Average passenger length of haul(11) Average cost of aircraft fuel per gallon, including fuel taxes and into-plane $ fees Average daily utilization (hours: minutes) (12) Number of operating aircraft in fleet at end of year 2008 2,552,478 2007 $ 2,309,983 2006 $ 1,892,083...

  • Page 43
    ...RPMs divided by revenue passengers (12) The average amount of time per day that an aircraft flown is operated in revenue service (13) Includes an operating expense reduction of $23.2 million related to the gain on sale of assets, principally gains on the sale of aircraft, and an operating expense of...

  • Page 44
    ...us). AirTran Airways is one of the largest low cost scheduled airlines in the United States in terms of departures and seats offered. We operate scheduled airline service throughout the United States with a concentration in the eastern United States. A majority of our flights originate and terminate...

  • Page 45
    ...171) Available seat miles (ASM) Total revenue per ASM in cents Operating cost per ASM in cents Average cost of aircraft fuel per gallon - in dollars $ 5,359,177 11.00¢ 9.97¢ 2.32 $ 18,450,013 10.64¢ 11.33¢ 3.53 $ 5,732,017 10.19¢ 9.93¢ 2.45 Our losses for the year ended December 31, 2008...

  • Page 46
    ...and Reduce Non-aircraft Capital Expenditures. We reduced our average non-fuel operating costs per available seat mile for each of the six years in the 2002 to 2007 period. During 2008, we managed our employment levels to match our planned capacity. For the year as a whole, our non-fuel unit cost was...

  • Page 47
    ... priority seat selection, call center utilization, checked baggage and the purchase, extension or transfer A+ Rewards. As a result, our total revenue per available seat mile metrics for the fourth quarter of 2008, and for 2008 as a whole, were record highs. Provide Quality Low Fare Service. Despite...

  • Page 48
    ... service, an affordable Business Class product, and one of the youngest all-Boeing aircraft fleets will provide product value that customers will continue to find attractive. 2009 Outlook We will face challenges during 2009. Managing costs and increasing unit revenues in the face of volatile fuel...

  • Page 49
    ...of one B717 aircraft, bringing our total fleet to 136 aircraft at year-end. While the aircraft fleet size was reduced by one unit, the average fleet size was 3.7 percent higher in 2008 compared to 2007. As a result, our capacity, as measured by available seat miles (ASMs), increased 4.9 percent. Our...

  • Page 50
    ... Landing fees and other rents Aircraft insurance and security services Marketing and advertising Depreciation and amortization Gain on sale of assets Impairment of goodwill Other operating Total CASM Aircraft fuel increased 41.8 percent on a cost per ASM basis. During 2008, our fuel price per...

  • Page 51
    ... names were not impaired. Consequently, we recorded a charge of $8.4 million to write-off the financial statement carrying value of all of our goodwill during 2008. Other (Income) Expense Other (income) expense, net increased by $163.1 million to $219.9 million for 2008 compared to 2007. We reported...

  • Page 52
    ... increase in passenger unit revenues as measured by passenger revenue per available seat mile (RASM) to 9.69 cents. During the year ended December 31, 2007, we took delivery and placed in service ten B737 aircraft. As a result, our capacity, as measured by available seat miles (ASMs), increased...

  • Page 53
    ... rents Aircraft insurance and security services Marketing and advertising Depreciation and amortization Gain on sale of assets Other operating Total CASM Aircraft fuel decreased 0.3 percent on a cost per ASM basis. Our fuel price per gallon, including taxes and intoplane fees, increased 2.8 percent...

  • Page 54
    ... to revenues derived from the transportation of passengers. Operating cash outflows are largely attributable to recurring expenditures for fuel, labor, aircraft rent, aircraft maintenance, marketing, and other activities. For the year ended December 31, 2008, we reported a net loss of $273.8 million...

  • Page 55
    .... During 2007, the $46.5 million increase in accounts payable and accrued and other liabilities contributed favorably to net cash provided by operating activities. Derivative financial instruments significantly impacted cash flow used by operating activities in 2008. Changes in the fair value of...

  • Page 56
    ... financial markets, satisfactory financing will be available to us when we are obligated to make pre-delivery deposit payments of $16.2 million in 2009. We have four B737 aircraft scheduled for delivery in 2009, two of which we have agreed to sell to a foreign air carrier to whom we previously sold...

  • Page 57
    ...: significant increases in fuel prices for an extended period of time; significant sustained declines in unit revenues as a consequence of unfavorable macroeconomic or other conditions; or, the increase in the percentage of advance ticket sales that are being held back by our credit card processors...

  • Page 58
    ... might not be available to us on terms acceptable to us or at all. For further discussions of 2009 liquidity requirements and the risks of our business, see ITEM 1A. "RISK FACTORS." Letter of Credit and Revolving Line of Credit Facility In 2008, we, with Airways as the borrower and Holdings as the...

  • Page 59
    ... times of the year. Our future aggregate cash and investments will be dependent on, among other factors, our future profitability, including the cost of fuel, the extent of cash collateral related to derivative financial instruments we may be required to fund, the level of advance ticket sales...

  • Page 60
    ... 31, 2008, the estimated fair value of our fuel related derivative financial instruments was a net liability of $65.5 million. The fair value of our fuel related derivatives is in large part a function of the current market and futures prices of the underlying commodities. Consequently, changes in...

  • Page 61
    ...current status of the financial markets, satisfactory financing will be available to us when we are obligated to make pre-delivery deposit payments of $16.2 million in 2009. We have agreed to sell two B737 aircraft to a foreign air carrier in 2009 contemporaneous with the delivery thereof to us. The...

  • Page 62
    ... carry terms of twelve years and are repaid either quarterly or semiannually. (2) Amounts include minimum operating lease obligations for aircraft, airport facilities, and other leased property. Amounts exclude contingent payments and aircraft maintenance deposit payments based on flight hours...

  • Page 63
    ... under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term taxexempt rate. Any unused NOLs in excess of the annual limitation may be carried over to later years. As of December 31, 2008, we believe that we were not subject...

  • Page 64
    ... year based on seasonal travel patterns and fare sale activity. Passenger revenue accounting is inherently complex and the measurement of the air traffic liability is subject to some uncertainty. A nonrefundable ticket expires at the date of scheduled travel unless the customer exchanges the ticket...

  • Page 65
    ... credits earned and redeemed, changes in the estimated incremental costs, and changes in the A+ Rewards Program. We also sell credits in our A+ Rewards Program to third parties, such as credit card companies, financial institutions, car rental agencies, and florists. Revenue from the sale of credits...

  • Page 66
    ... jet fuel prices are estimated using other energy commodity futures prices (such as heating oil) and adjusted based on historical variations to those similar energy commodities. In summary, SFAS 133 requires that changes in fair value (i.e., unrealized gains and losses) on some derivative financial...

  • Page 67
    ... the assets. The actual useful lives and salvage values could be different from the estimates. Generally, changes in estimated lives and salvage values are accounted for by adjusting depreciation and amortization expense prospectively. New Accounting Pronouncement In May 2008, the FASB issued Staff...

  • Page 68
    ... increase in fair value resulting from a hypothetical 100 basis point decrease in interest rates, was approximately $20.9 million as of December 31, 2008. Aviation Fuel Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel...

  • Page 69
    ... rate per gallon and receive the monthly average price of Gulf Coast jet fuel. The fuel related option arrangements include collars, purchased call options, and sold call options. Depending on market conditions at the time a derivative contract is entered into, we generally use jet fuel, heating...

  • Page 70
    ... to Financial Statements and Supplementary Data Page AirTran Holdings, Inc. Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations - Years ended December 31, 2008, 2007, and 2006 Consolidated Balance Sheets - December 31, 2008 and 2007 Consolidated Statements...

  • Page 71
    ... balance sheets of AirTran Holdings, Inc. (the "Company") as of December 31, 2008 and 2007, and the related consolidated statements of operations, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility...

  • Page 72
    AirTran Holdings, Inc. Consolidated Statements of Operations (In thousands, except per share data) Year ended December 31, 2008 2007 2006 Operating Revenues: Passenger Other Total operating revenues Operating Expenses: Aircraft fuel Salaries, wages and benefits Aircraft rent Maintenance, materials ...

  • Page 73
    ... depreciation and amortization Total property and equipment Other Assets: Long-term investments Goodwill Trademarks and trade names Debt issuance costs Prepaid aircraft rent Other assets Total Assets See accompanying notes to Consolidated Financial Statements. $ 315,078 19,937 86,126 48,820 38,301...

  • Page 74
    ... value per share, 5,000 shares authorized, no shares issued or outstanding Common stock, $.001 par value per share, 1,000,000 shares authorized, and 119,550 and 91,886 shares issued and outstanding at December 31, 2008 and 2007, respectively Additional paid-in capital Accumulated earnings (deficit...

  • Page 75
    ... fuel Deposits held by counterparties to derivative financial instruments Prepaid aircraft rent Other assets Accounts payable, accrued and other liabilities Air traffic liability Net cash provided by (used for) operating activities Investing activities: Purchase of available-for-sale securities Sale...

  • Page 76
    AirTran Holdings, Inc. Consolidated Statements of Stockholders' Equity (In thousands) Accumulated Additional Accumulated Total Other Paid-in Unearned Common Stock Comprehensive Earnings Stockholders' (Deficit) Equity Shares Amount Capital Compensation Income (Loss) Balance at January 1, 2006 Net ...

  • Page 77
    ... capacity starting in September 2008; deferring new aircraft deliveries; selling aircraft; reducing other capital expenditures; implementing increases in certain fares and ancillary fees; entering into a variety of derivative financial arrangements to hedge the cost of fuel; and managing our costs...

  • Page 78
    ... airports and insurance, credit card holdbacks for advance ticket sales, cash escrowed for future interest payments, and collateral to support derivative financial instrument arrangements. Investments Investments are considered available for sale securities and are stated at fair value. Short-term...

  • Page 79
    ...estimated useful lives for airframes, engines and aircraft parts are 30 years. Other property and equipment is depreciated over three to ten years. Leasehold improvements are amortized over the economic life of the asset or the lease term, whichever is shorter. The financial statement carrying value...

  • Page 80
    ... 2008. We also performed the annual impairment test of the financial statement carrying value of our trade name and trademarks in the fourth quarter of each year and concluded there was no impairment. Capitalized Interest Interest attributable to funds used to finance the acquisition of new aircraft...

  • Page 81
    ... using an option pricing model. The fair value of a restricted stock award is based on the trading price of our common stock on the date of grant. Frequent Flyer Program We accrue a liability for the estimated incremental cost of providing free travel for awards earned under our A+ Rewards Program...

  • Page 82
    ... recorded any material interest or penalties during any of the years presented. New Accounting Pronouncements In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 defines fair value...

  • Page 83
    ... adopted SFAS 159 as of January 1, 2008, we have not yet elected the fair value option for any items permitted under SFAS 159. In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (Revised 2007) (SFAS 141R), Business Combinations. SFAS 141R establishes principles and...

  • Page 84
    ... and are evaluating possible net reductions in our current fleet including through the sale of additional aircraft. The table below illustrates, as of December 31, 2008, all aircraft currently scheduled for delivery: Firm Aircraft Deliveries B737 4 5 9 5 14 8 10 55 2009 2010 2011 2012 2013 2014...

  • Page 85
    ... with organizations that process credit card transactions arising from purchasing air travel by customers of Airways. Each of our agreements with our credit card processors allows, under specified conditions, the processor to retain cash related to future travel that such processor otherwise...

  • Page 86
    ... times of the year. Our future aggregate cash and investments will be dependent on, among other factors, our future profitability, including the cost of fuel, the extent of cash collateral related to derivative financial instruments we may be required to fund, the level of advance ticket sales...

  • Page 87
    ... cash consists of amounts escrowed related to aircraft leases, letters of credit, credit card holdbacks for advanced ticket sales, cash escrowed for future interest payments and collateral to support derivative financial arrangements. As of December 31, 2008, $16.3 million of restricted cash relates...

  • Page 88
    ..., 2008, and $1.1 billion and $1.1 billion, respectively, at December 31, 2007. The estimated fair value of debt is based upon discounted future cash flows using estimated incremental borrowing rates for similar types of instruments or market prices. Our 7% and 5.5% convertible notes trade from time...

  • Page 89
    ...31, 2008 was $177.7 million. The primary objective for our use of interest rate swaps is to reduce the impact on our operating results of the volatility of interest rates. These interest rate swap arrangements are accounted for as cash flow hedges. The ineffective portion of the change in fair value...

  • Page 90
    The following table summarizes the fair value of our derivative financial instruments (in thousands): Derivative Assets December 31, 2008 2007 Balance Sheet Derivatives designated as hedging instruments under SFAS 133 Interest rate contracts Interest rate contracts Jet-fuel swaps and options Total ...

  • Page 91
    ... financial instruments on the Statements of Operations and on Other Comprehensive Income (in thousands): Years ended December 31, Location of (Gain) Loss reclassified from accumulated Amount of (gain) loss OCI into income on derivatives (effective recognized in portion) OCI (effective portion) 2008...

  • Page 92
    ... fail to meet their obligations. Our credit exposure related to these financial instruments is represented by the fair value of contracts reported as assets. To manage credit risk, we select and periodically review counterparties based on credit ratings. We provide the counterparties with collateral...

  • Page 93
    ...• Assets (primarily flight equipment) with a net book value of $1.04 billion served as collateral for the B737 and B717 notes. • Aircraft pre-delivery deposits served as collateral for pre-delivery deposit financing and for the Letter of Credit and Revolving Line of Credit Facility. Additionally...

  • Page 94
    ... to a number of shares of our common stock calculated based on the conversion rate, the cash proceeds from the sale by the escrow agent of that portion of government securities in the escrow account that relate to the applicable holder's 5.5% notes being converted. During the fourth quarter of 2008...

  • Page 95
    ... issuance costs with a corresponding increase in paid in capital. The amortization of the debt issuance costs is classified as interest expense. Note 6 - Leases Total rental expense charged to operations for aircraft, facilities and office space for the years ended December 31, 2008, 2007 and 2006...

  • Page 96
    ..., 2008 and 2007, the balance of all maintenance deposits for all the B737 leased aircraft and leased engines aggregated $54.2 million and $49.4 million, respectively. We also lease facilities from local airport authorities or other carriers, as well as office space under operating leases with terms...

  • Page 97
    ... participate in increases in the value of the aircraft. This is the case in the majority of our aircraft leases; however, we have two aircraft leases that contain fixed-price purchase options that allow us to purchase the aircraft at predetermined prices on specified dates during the lease term. We...

  • Page 98
    ... - 19,937 - Market Long-term investments 5,497 - 5,497 - Market Interest rate derivatives (21,338) - (21,338) - Market Fuel derivatives (65,504) - - (65,504) Market The reconciliation of our fuel derivatives that are measured at fair value on a recurring basis using significant unobservable inputs...

  • Page 99
    ... with the third quarter of 2008, our losses were not reduced by any tax benefit. Consequently, our effective tax rate for the year ended December 31, 2008 was substantially lower than the statutory rate. As of December 31, 2008, we had recorded $97.2 million of valuation allowance related to our...

  • Page 100
    ... for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax liabilities and assets are as follows (in thousands): December 31, 2008 2007 Deferred tax assets related to: Deferred gains from sale and leaseback of aircraft Accrued...

  • Page 101
    ... The following table sets forth the computation of basic and diluted earnings (loss) per common share (in thousands, except per share amounts): Year ended December 31, 2008 2007 2006 Numerator: Net income (loss) available to common stockholders Plus income effect of assumed conversion-interest on...

  • Page 102
    ... grant of options to officers, directors and key employees to purchase up to 4.8 million shares of common stock at prices not less than the fair value of the shares on the dates of grant. Our 2002 Long Term Incentive Plan, 1996 Stock Option Plan and 1994 Stock Option Plan authorized up to 5 million...

  • Page 103
    ... years ended December 31, 2008 and 2007, we did not record any excess tax benefit generated from option exercises. Restricted Stock Restricted stock awards have been granted to certain of our officers, directors and key employees pursuant to our 2002 Long-Term Incentive Plan. Restricted stock awards...

  • Page 104
    ... from the market value on the offering date. The Board of Directors determines the discount rate, which was increased to 10 percent from 5 percent effective November 1, 2001. We are authorized to issue up to 4 million shares of common stock under this plan. During 2008, 2007, and 2006, the employees...

  • Page 105
    ... the third quarter of 2007 include non-operating expense of $10.7 million, ($6.4 million net of tax), related to costs associated with the proposed acquisition of Midwest, including the exchange offer, and consisted primarily of fees for attorneys, accountants, investment bankers, travel, and other...

  • Page 106
    ... - Quarterly Financial Data (Unaudited) Summarized quarterly financial data by quarter for 2008 and 2007 is as follows (in thousands, except per share data): Three Months Ended June 30 September 30 693,380 $ (45,524) (29,292) (16,232) (13,538) (.12) $ (.12) March 31 2008 Operating revenue Operating...

  • Page 107
    ... in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance to management and the board of directors regarding the preparation and fair presentation of published financial statements...

  • Page 108
    ... of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly...

  • Page 109
    ...1996 Stock Option Plans and our 2002 Long-Term Incentive Plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is incorporated herein by reference to our 2009 Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The...

  • Page 110
    ... Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (5) 1996 Stock Option Plan (3)(6) Airways Corporation 1995 Stock Option Plan (3)(8) Airways Corporation 1995 Directors Stock Option Plan (3)(8) Lease of headquarters in Orlando, Florida, dated November 14...

  • Page 111
    ... Term Incentive Plan (17) Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. ("AirTran"), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and The Royal Bank of Scotland plc, New York Brach ("RBS"), as Security Agent (20) Credit Agreement...

  • Page 112
    ... Bank of Scotland Plc New York Branch, as Security Agent (24) Third Amended and Restated Long-Term Incentive Plan, Amended and Restated March 28, 2007 (25) Loan Agreement, dated as of February 12, 2007, by and among AirTran, as Borrowers, The Parties Identified in Schedule 1 thereto, as Lenders, and...

  • Page 113
    ... to the Company's Registration Statement on Form S-1, registration number 33-78856, filed with the Commission on May 12, 1994 and amendments thereto. Management contract or compensation plan or arrangement required to be filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c) of Form...

  • Page 114
    ... Statement on Form S-4, registration number 333-139917, filed with the Commission on January 11, 2007. Incorporated by reference to the Company's report on Form 8-K (Commission File No. 1-15991), filed with the Commission on May 2, 2008. Incorporated by reference to the Company's Quarterly Report...

  • Page 115
    ... undersigned, thereunto duly authorized. AIRTRAN HOLDINGS, INC. By: /s/ Robert L. Fornaro Robert L. Fornaro Chairman of the Board, President and Chief Executive Officer Date: February 13, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by...

  • Page 116
    /s/ Lewis H. Jordan Lewis H. Jordan Director /s/ Alexis P. Michas Alexis P. Michas Director February 13, 2009 February 13, 2009 Michael P. Jackson Director 108

  • Page 117
    ... Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (5) 1996 Stock Option Plan (3)(6) Airways Corporation 1995 Stock Option Plan (3)(8) Airways Corporation 1995 Directors Stock Option Plan (3)(8) Lease of headquarters in Orlando, Florida, dated November 14...

  • Page 118
    ... Term Incentive Plan (17) Loan Agreement, dated as of August 31, 2005, by and among AirTran Airways, Inc. ("AirTran"), as Borrower, The Parties Identified in Schedule 1 thereto as Lenders, as Lenders, and The Royal Bank of Scotland plc, New York Brach ("RBS"), as Security Agent (20) Credit Agreement...

  • Page 119
    ... Bank of Scotland Plc New York Branch, as Security Agent (24) Third Amended and Restated Long-Term Incentive Plan, Amended and Restated March 28, 2007 (25) Loan Agreement, dated as of February 12, 2007, by and among AirTran, as Borrowers, The Parties Identified in Schedule 1 thereto, as Lenders, and...

  • Page 120
    ... to the Company's Registration Statement on Form S-1, registration number 33-78856, filed with the Commission on May 12, 1994 and amendments thereto. Management contract or compensation plan or arrangement required to be filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c) of Form...

  • Page 121
    ... Statement on Form S-4, registration number 333-139917, filed with the Commission on January 11, 2007. Incorporated by reference to the Company's report on Form 8-K (Commission File No. 1-15991), filed with the Commission on May 2, 2008. Incorporated by reference to the Company's Quarterly Report...

  • Page 122

  • Page 123
    ...Lauderdale Miami San Antonio Houston (Hobby) MEXICO Cancun San Juan For schedules, go to airtran.com. Effective June 11, 2009 Routes and cities subject to change without notice. Some nonstop routes indicated operate seasonally and/or less than daily. * Seattle/Tacoma, San Diego, and Burlington...

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    2008 AIRTRAN HOLDINGS, INC.