Airtran 2008 Annual Report Download - page 12

Download and view the complete annual report

Please find page 12 of the 2008 Airtran annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

We took delivery of our first B737 aircraft in June 2004 and, as of February 2, 2009, our B737 fleet was
comprised of 50 aircraft. In addition to the 50 B737 aircraft, we hold firm orders for 55 B737 aircraft to be
delivered between 2009 and 2016. We believe the B737 is an ideal complement to our B717 aircraft, offering us
a larger aircraft, increased range, and even lower operating cost per available seat mile flown. The B737 aircraft
has allowed us to extend our network to selected cities in the western United States and gives us the ability to
expand our international operations to additional locations in Mexico as well as locations in Canada, Central
America, and the Caribbean should we choose to do so. We believe the B737 aircraft enhances the AirTran
Airways brand while offering improvements in our operating performance.
Seasonality
Our financial and operating results for any interim period are not necessarily indicative of those for the entire
year. Air travel in our markets tends to be seasonal, with the highest levels occurring during the winter months
to Florida and the summer months to the northeastern and western United States. Advertising and promotional
expenses may be greater in lower traffic periods, as well as when entering a new market, as we seek to stimulate
demand and promote the AirTran Airways brand.
Competitive Strengths
Low Cost Structure. Our cost structure ranks among the lowest in the domestic airline industry in terms of cost
per available seat mile, providing a competitive advantage compared to higher cost carriers. Our low operating
costs are made possible through a company-wide focus on cost controls with emphasis on high labor
productivity, lower distribution costs, and higher asset utilization. In addition, we realize efficiencies from the
operation of only 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 employment levels to match our planned capacity. As we reduce
our capacity, our total non-fuel operating costs are reduced and our unit operating costs, as measured by
operating costs per available seat mile, tend to increase. As a result, our non-fuel operating cost per ASM
increased 4.6 percent during the fourth quarter of 2008 compared to the analogous period in 2007. We believe
that we continue to have the lowest non-fuel operating costs among U.S. major airlines on an aircraft stage
length adjusted basis.
Attractive Atlanta Hub and Route Network. We operate 22 gates from a single concourse under long-term leases
at Hartsfield-Jackson Atlanta International Airport, the world’s busiest airport, and have use agreements for
additional gates on an adjacent concourse and potential for expansion. With our 2008 expansion to Burlington,
Vermont; Columbus, Ohio; Harrisburg, Pennsylvania; San Antonio, Texas; and San Juan, Puerto Rico, we now
offer quality low fare service to 52 destinations from Atlanta, including service to most of the largest travel
markets within the continental United States and Puerto Rico. Additionally, we have announced that we will
commence service to Cancun, Mexico and Branson, Missouri in the first half of 2009 and we may add
additional markets later in the year.
Diversified Traffic Base. We serve both the leisure and business traveler. Our revenue base grew by more than
22 percent in 2007, and more than ten percent in 2008. Over the past six years, we have also diversified our
network, increasing operations in key business markets like Baltimore/Washington (BWI), New York (LGA),
Milwaukee (MKE), Chicago-Midway (MDW), and Indianapolis (IND), as well as adding a number of new
direct routes from Florida. As a percentage of total operations, Atlanta represents approximately 62 percent of
our network, down from approximately 90 percent at the end of 2001. This market diversification provides a
number of marketing and cost synergies and adds stability to our revenues by protecting against risks that may
impact individual markets.
4