Airtran 2009 Annual Report Download

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AIRTRAN HOLDINGS, INC.
ANNUAL REPORT TO SHAREHOLDERS 2009
AirTran Airways is the recipient of the prestigious 2010 Market Leadership Award from Air Transport World

Table of contents

  • Page 1
    AIRTRAN HOLDINGS, INC. AirTran Airways is the recipient of the prestigious 2010 Market Leadership Award from Air Transport World ANNUAL REPORT TO SHAREHOLDERS 2009

  • Page 2
    ... by writing AirTran Holdings, Inc. • Attention : Investor Relations • 9955 AirTran Blvd. • Orlando, FL 32827. CORPORATE GOVERNANCE : On June 30, 2009, Robert L. Fornaro, Chairman, President and Chief Executive Officer, submitted to the New York Stock Exchange the Annual CEO Certification...

  • Page 3
    ... No.) 9955 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...

  • 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, 2009, was approximately $740 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 18, 2010 and to be filed with the Commission, are incorporated by reference into this Report on Form 10-K.

  • Page 6
    ... and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate...

  • Page 7
    ... forward-looking statements, including estimates, projections, statements relating to our business plans and objectives, expected financial performance and expected results of operations, our operations and related industry developments, expected fuel costs, the revenue and pricing environment, our...

  • Page 8
    ... global capital markets; the cost, price volatility, and availability of aviation fuel - including the impact of significant disruptions in fuel supply and significant increases in fuel prices; the impact of potential future significant operating losses; our ability to generate working capital from...

  • Page 9
    ... insurance; the impact of fleet concentration and changes in fleet mix; the impact of increased maintenance costs as our aircraft age and/or utilization increases; the impact of new FAA regulations or Airworthiness Directives on our operations, including the cost of complying with such regulations...

  • Page 10
    ...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 11
    ..., ticketing, and check-in through our • award winning Web site, http://www.airtran.com • Bye-Pass® airport self-service kiosks • Mobile Web program, allowing customers to view flight status, check in for flights and select seats using their mobile communications and information devices...

  • Page 12
    ...by available seat miles (ASMs). The new flights are part of our strategy to expand service from General Mitchell International Airport in Milwaukee and build our presence in the Midwest. Together with our marketing partner SkyWest Airlines, in February 2010, we will serve 22 non-stop destinations to...

  • Page 13
    ... 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 offer alternate forms of payment, including...

  • Page 14
    ... as we increase the 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. As we slowed our growth in 2008 and reduced our capacity in 2009, our total non-fuel operating costs and...

  • Page 15
    ...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 from our Atlanta hub...

  • Page 16
    .... Seats on these flights are sold in conjunction with AirTran Airways flights with revenue shared on a pro-rated basis. Once fully implemented in February 2010, SkyWest Airlines will offer 18 daily non-stop flights from Milwaukee to six destinations, and, together with our marketing partner, we...

  • Page 17
    ... costs going forward. We offer our customers an affordable Business Class product. An AirTran Airways Business Class cabin is configured with two-by-two oversized seats with more leg and seat room than the typical coach cabin. For a fee, our Business Class is available via an upgrade program...

  • Page 18
    ... travel or Business Class upgrades, or under certain circumstances, free travel on other airlines. A+ Rewards credits can also be earned for purchases made with an AirTran Airways A+ Visa card, when renting from Hertz, purchases from other A+ Rewards partners, and in conjunction with marketing...

  • Page 19
    ... and/or working condition demands that could impact our operating performance and expenses. Fuel Aircraft fuel is our largest expenditure and accounted for 31.4 percent, 45.5 percent and 37.1 percent of our 2009, 2008, and 2007 operating expenses, respectively. Increases in fuel prices or a shortage...

  • Page 20
    ... their pricing. During 2010, we expect aircraft maintenance costs to increase due to the aging of both aircraft types, a contractual cost increase for B717 engine repairs, and an increased number of heavy checks for our B717 aircraft. We believe the long-term cost of maintaining our aircraft will...

  • Page 21
    ... 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 to establish non-weight based fees during peak hours in...

  • Page 22
    ... for airport security. The 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...

  • Page 23
    ..., including air carrier operations, which affect the quality of air in the United States. We believe the aircraft in our fleet meet all emission standards issued by the EPA. We may become subject to additional taxes or requirements to obtain permits for green house gas emissions. See ITEM 1A...

  • Page 24
    ... non-fuel operating costs are the lowest of any major U.S. airline and because some carriers may have greater financial resources than we do, our business may be more sensitive to changes in fuel prices. During 2008, our business was adversely affected by both increases in the price of aircraft fuel...

  • Page 25
    ...well as foreign and regional airlines, some of which have greater financial resources. We face competition from other existing low cost carriers and in the future could face competition from start-up airlines seeking to employ low-cost strategies. In most of the markets which we currently serve, and...

  • Page 26
    ... 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. The availability of international routes...

  • Page 27
    ... American Clean Energy and Security Act of 2009. The Senate is scheduled to consider the legislation in 2010. The law would regulate GHG emissions through a cap and trade system. Fuel producers may be required to acquire allowances sufficient to cover the GHG content of the fuel they sell, the cost...

  • Page 28
    ...: a pronounced increase in aircraft fuel prices, a decline in demand for air travel due to adverse macroeconomic conditions; competitive actions by other airlines which reduce revenue; insufficient availability of financing for new aircraft deliveries; increases in interest rates on existing...

  • Page 29
    ... financing for any of our scheduled aircraft deliveries. There are multiple variables including capital market conditions, asset valuations, and our own operating performance that could affect the availability of satisfactory financing for our future B737 aircraft deliveries. While there was limited...

  • Page 30
    ...our ability to obtain additional financing for aircraft purchases, capital expenditures, working capital or general corporate purposes; and limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and, consequently, place us at a competitive...

  • Page 31
    ...-fuel operating costs among major U.S. air carriers. However, since 2001, in order to respond to intense competition, the high price of fuel, and slower general economic conditions, a number of our competitors have taken various actions in an effort to reduce their costs including reducing employee...

  • Page 32
    ... percent of our fuel requirements, over time, a sustained decrease in fuel prices tends to produce a net cash benefit even though a significant decrease in fuel prices may cause a net use of cash in the period when prices decrease. Increased labor costs, union disputes, employee strikes, and other...

  • Page 33
    ...Any need for work force reductions or wage and benefit concessions as a result of an adverse business and operating environment could have an adverse effect on our labor relations and employee morale. We are subject to various risks as a result of our fleet concentration in two aircraft types. As of...

  • Page 34
    ... of or a failure to capture data, negatively affect our customer service, result in increased costs and expenses, or generally cause harm to our business. If we incur problems with any of our third party airport services providers, our operations could be adversely affected by a resulting decline in...

  • Page 35
    the event of an ownership change, utilization of our NOLs would be subject to an annual limitation under Section 382. Any unused NOLs in excess of the annual limitation may be carried over to later years. The imposition of a limitation on our ability to use our NOLs to offset future taxable income ...

  • Page 36
    ... orders for additional aircraft, see Notes 1, 2, 4 and 5 to the Consolidated Financial Statements. Ground Facilities We have signatory status on the lease of facilities at Hartsfield-Jackson Atlanta International Airport. This lease covers use of 22 gates and expires in September 2010. We also have...

  • Page 37
    ... against Delta Air Lines, Inc. (Delta) and AirTran in the United States District Court for the Northern District of Georgia in Atlanta on May 22, 2009. The complaint alleges, among other things, that AirTran conspired with Delta in imposing $15-per-bag fees for the first item of checked luggage. The...

  • Page 38
    ITEM 4. None. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS 29

  • Page 39
    ... 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 2009 and 2008: 2009 Quarter 1st...

  • Page 40
    ... Non-fuel operating cost per ASM (10) Average cost of aircraft fuel per gallon (11) $ Gallons of fuel burned (000's) Operating aircraft in fleet at end of year Average daily utilization (hours:minutes) (12) Full-time equivalent employees at end of year 2009 2,341,442 2008 $ 2,552,478 2007 $ 2,309...

  • Page 41
    ... of an airline's unit operating expense which facilitates an understanding of operating costs over time. (11) Total fuel expense, including taxes and into-plane fees, divided by gallons of fuel burned (12) The average amount of time per day that an aircraft flown is operated in revenue service (13...

  • Page 42
    ... Airways, Inc. (AirTran Airways or Airways) (collectively we, our, or 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 and to selected international...

  • Page 43
    ...by available seat miles (ASMs). The new flights are part of our strategy to expand service from General Mitchell International Airport in Milwaukee and build our presence in the Midwest. Together with our marketing partner SkyWest Airlines, in February 2010, we will serve 22 non-stop destinations to...

  • Page 44
    ... reduction was also a contributing factor to the increase in our non-fuel unit operating costs. As summarized below, our operating results for the second half of 2009 were impacted by increased jet fuel prices. Selected 2009 Unaudited Financial and Operating Data July January - December June $ 1,145...

  • Page 45
    .... Seats on these flights are sold in conjunction with AirTran Airways flights with revenue shared on a pro-rated basis. Once fully implemented in February 2010, SkyWest Airlines will offer 18 daily non-stop flights from Milwaukee to six destinations, and, together with our marketing partner, we...

  • Page 46
    ... 2010 non-fuel unit operating costs will increase due to: increases in aircraft maintenance costs, higher employee compensation costs due to higher wage rates attributable to higher average employee seniority and wage scales, increased revenue related costs, and higher airport rents and landing fees...

  • Page 47
    ... 31, 2009, increased $113.6 million (81.8 percent) compared to the year ended December 31, 2008, reflecting in large part pricing changes for ancillary customer services resulting from the unbundling of our service product. Other revenues include change and cancellation fees, direct booking fees...

  • Page 48
    ... increases in the number and cost of airframe checks and rate increases in certain of our power-by-the-hour maintenance agreements. Landing fees and other rents increased 6.9 percent on a cost per ASM basis primarily due to increased landing fees and higher rental rates at various airports for gate...

  • Page 49
    ... 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. We reported net (gains) on derivative financial instruments of ($30.6 million) for 2009, compared to a net loss of $150...

  • Page 50
    ... a 4.6 percent increase in passenger revenue per ASM versus the year ended December 31, 2007. Other revenues for 2008 increased $27.8 million (25.0 percent). Other revenues include change and cancellation fees, direct booking fees, revenues derived from the sale of frequent flyer credits, additional...

  • Page 51
    ... to higher credit card fees paid to various credit card companies. Landing fees and other rents increased 7.4 percent on a cost per ASM basis primarily due to facility rental rate increases by various airports. Aircraft insurance and security services expense decreased 10.0 percent on a cost per ASM...

  • Page 52
    ... rate) due to changes in the valuation allowance on our deferred tax assets, certain expenses which are not deductible for income tax purposes, and non-recurring discrete items related to restricted stock vesting. During 2008, we recorded an $8.4 million charge to write-off all of the carrying value...

  • Page 53
    ... 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, 2009, we reported net income of $134.7 million...

  • Page 54
    ... consequently receive additional cash for future travel. This historical source of cash will decline or change to a use to the extent our growth slows or reverses or the amounts held back by our credit card processors increase. During 2009, our air traffic liability balance decreased $25.2 million...

  • Page 55
    ... of our common stock at a conversion rate of 164.0420 shares per $1,000 in principal amount of such notes which equals an initial conversion price of approximately $6.10 per share. In 2009, our Board of Directors authorized, at management's discretion, the repurchase, from time-to-time, of up to...

  • Page 56
    ... expenditure needs, and operating commitments; such options may include internally generated funds as well as various financing or leasing options, including the sale, lease, or sublease of our aircraft or other assets. Additionally, we have a $125 million revolving line of credit facility, under...

  • 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 an increase in the percentage of advance ticket sales held back by our credit card processors. Credit Facility...

  • Page 58
    ...The foreign airline defaulted on its obligation to us to purchase the two aircraft. We placed these aircraft in service in October 2009. The table below summarizes, as of December 31, 2009, all aircraft scheduled for delivery to us: Scheduled Firm Aircraft Deliveries B737 7 8 6 12 8 10 51 2010 2011...

  • Page 59
    ... us to repurchase the notes in 2010. Our debt agreements for aircraft acquisitions generally 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...

  • Page 60
    ... 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, 2009, we believe that we were not subject...

  • Page 61
    ... incremental cost of providing free travel for awards earned under our A+ Rewards Program based on credits we expect to be redeemed on us or the contractual rate of expected redemption on other carriers. Incremental cost includes the cost of fuel, catering, and miscellaneous direct costs, but...

  • Page 62
    ...time of sale. A change to the time period over which the credits are used (currently one to two years), the actual redemption activity, or our estimate of the amount of, or fair value...is reported as a component of other comprehensive income and reclassified into earnings in the same line item ...

  • Page 63
    ... their fair values. Depending on the type of instrument, the values are determined by the use of present value methods or mathematical option value models with assumptions about commodity prices based on those observed in the respective markets. Forward jet fuel prices are estimated using other...

  • Page 64
    ...2009, we filed a report on Form 8-K with the SEC which included our consolidated financial statements as of December 31, 2008 and 2007 and for each of the three years... in the financial statements. We have reviewed subsequent events through February 11, 2010 (the date of the issuance...

  • Page 65
    ... increase in fair value resulting from a hypothetical 100 basis point decrease in interest rates, was approximately $24.5 million as of December 31, 2009. Aviation Fuel Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel...

  • Page 66
    .... As of December 31, 2009, the estimated fair value of our fuel-related derivative financial instruments was a net asset of $49.3 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...

  • Page 67
    ... 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 68
    ... of Derivative Financial Instruments) Compared to Jet Fuel Cost Based on Crude Oil of $70 per Barrel Estimated Total Ultimate Cash Benefit (Use) of Our FuelRelated Derivative Financial Instruments Held as of December 31, 2009 Year Ended December 31, 2010 Assumed average market crude price: $ 50 per...

  • Page 69
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index 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, 2009, 2008, and 2007 Consolidated Balance ...

  • Page 70
    ... (United States), AirTran Holdings, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 11, 2010...

  • Page 71
    AirTran Holdings, Inc. Consolidated Statements of Operations (In thousands, except per share data) Year ended December 31, 2009 2008 2007 Operating Revenues: Passenger Other Total operating revenues Operating Expenses: Aircraft fuel Salaries, wages and benefits Aircraft rent Maintenance, materials ...

  • Page 72
    AirTran Holdings, Inc. Consolidated Balance Sheets (In thousands) December 31, 2009 2008 ASSETS Current Assets: Cash and cash equivalents Short-term investments Restricted cash Deposits held by counterparties to derivative financial instruments Accounts receivable, less allowance of $1,468 and $1,...

  • Page 73
    ... December 31, 2009 2008 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable Accrued and other liabilities Air traffic liability Derivative financial instruments Current maturities of capital lease obligations Borrowing under revolving line of credit facility Current maturities...

  • Page 74
    AirTran Holdings, Inc. Consolidated Statements of Cash Flows (In thousands) Year ended December 31, 2009 2008 2007 Operating activities: Net income (loss) $ Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization Amortization ...

  • Page 75
    AirTran Holdings, Inc. Consolidated Statements of Stockholders' Equity (In thousands) Common Stock Shares Amount Balance at January 1, 2007 Net income Unrealized gain on derivative instruments, net of income taxes of $0.6 million Actuarial gain on post-employment obligations, net of income taxes of...

  • Page 76
    ... are earned in the United States. Business Through AirTran Airways, we offer scheduled airline services, using Boeing B717-200 aircraft (B717) and Boeing B737-700 aircraft (B737), to 62 locations throughout the United States and to selected international locations. Approximately half of our flights...

  • Page 77
    ...These items are charged to expense when used. Allowances for obsolescence are provided over the estimated useful life of the related aircraft and engines for spare parts expected to be on hand at the date aircraft are retired from service. During the years ended December 31, 2009, 2008, and 2007, we...

  • Page 78
    ... 2009. 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 79
    ...date of scheduled travel unless the customer exchanges his or her ticket for a credit. A percent of credits we issue expire unused. We recognize as revenue over time the value of credits that we expect to go unused in proportion to the credits that are used. We estimate the amount of credits that we...

  • Page 80
    ... entities. The Codification became effective for financial statements issued for reporting periods that end after September 15, 2009. The Codification superseded all then-existing non-SEC accounting and reporting standards. The Codification did not change rules and interpretations of the SEC which...

  • Page 81
    ... 11, 2010 (the date of the issuance of the accompanying condensed consolidated financial statements). In October 2009, the FASB issued an Accounting Standards Update (ASU No. 2009-13) pertaining to multipledeliverable revenue arrangements. The new guidance will affect accounting and reporting for...

  • Page 82
    ... subsequently sold) and we also sold six used B737 aircraft in our fleet. In 2008, we took delivery of eight aircraft, including the aforementioned two new aircraft that we sold in 2008. We had four B737 aircraft scheduled for delivery during 2009. In 2009, we permitted The Boeing Company ("Boeing...

  • Page 83
    ... terminate any B717 aircraft leases. Credit Card Processing Arrangements We have agreements with organizations that process credit card transactions arising from purchases of air travel by customers of Airways. Each of our agreements with our credit card processors allows, under specified conditions...

  • Page 84
    ... the manufacture, design, ownership, financing, use, operation, and maintenance of the aircraft, whether or not these liabilities arise out...cost increase. x We have various leases with respect to real property and various agreements among airlines relating to fuel consortia or fuel farms at airports...

  • Page 85
    ... against Delta Air Lines, Inc. (Delta) and AirTran in the United States District Court for the Northern District of Georgia in Atlanta on May 22, 2009. The complaint alleges, among other things, that AirTran conspired with Delta in imposing $15-per-bag fees for the first item of checked luggage. The...

  • Page 86
    ... of operations of the Company. The Company expenses legal costs as they are incurred. Restricted Cash and Letters of Credit Restricted cash consists primarily of amounts escrowed related to aircraft leases, letters of credit for airports and insurance, credit card holdbacks for advance ticket sales...

  • Page 87
    ...) Expense based on changes in estimated fair value. The gains and losses on other fuel-related derivative financial instruments, previously designated as hedges for financial accounting purposes, were classified as a component of fuel expense when realized. We have interest-rate swap agreements that...

  • Page 88
    The following table summarizes the fair value of our derivative financial instruments (in thousands): Balance Sheet Location Derivatives designated as hedging instruments Interest-rate contracts Interest-rate contracts Jet fuel swaps and options Total Derivatives not designated as hedging ...

  • Page 89
    ... 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 90
    ... liability as of December 31, 2010. We have the option to pay the repurchase price in shares of our common stock, in cash, or in any combination of the two. If the holders of the 7.0% convertible notes require us to repurchase the notes, it is our policy to pay the repurchase price in cash. 81

  • Page 91
    ...) with a net book value of $1.1 billion served as collateral for the B737 and B717 aircraft notes payable. x Aircraft pre-delivery deposits served as collateral for the Credit Facility. Airways' obligations under the Credit Facility are secured by the pledge of -- directly or indirectly -- its...

  • Page 92
    ... or in part in shares of our common stock, the number of shares to be delivered in exchange for the portion of the repurchase price to be paid in our common stock will be equal to that portion of the repurchase price divided by 97.5% of the closing sale price of our common stock for the five trading...

  • Page 93
    ...-converted value of the 7.0% convertible notes did not exceed the principal amount. In 2009, our Board of Directors authorized, at management's discretion, the repurchase, from time-to-time, of up to $50 million of our 7.0% convertible notes in open market transactions at prevailing market prices or...

  • Page 94
    ... to pay a facility fee, letter of credit fees and fees on undrawn amounts under the revolving line of credit facility. We may borrow once a month and are permitted to repay amounts borrowed at any time without penalty. As of December 31, 2008, December 31, 2009 and February 1, 2010, we had $90...

  • Page 95
    ... 2.9 million shares of our common stock for all of the previously issued and outstanding warrants, which warrants were thereafter cancelled. Note 5 - Leases Total rental expense charged to operations for aircraft, facilities, and office space for the years ended December 31, 2009, 2008, and 2007 was...

  • Page 96
    ... for all the B737 leased aircraft and related leased engines aggregated $55.8 million and $54.2 million, respectively. We also lease facilities from local airport authorities or other carriers, as well as office space under operating leases with terms ranging up to 12 years. In addition, we lease...

  • Page 97
    ...a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1- observable inputs such as quoted prices in active markets; Level 2- inputs, other than the quoted market prices in active markets, which are observable, either directly or indirectly; and...

  • Page 98
    ... fair value of our debt was estimated using quoted market prices where available. For long-term debt not actively traded, the fair value was estimated using a discounted cash flow analysis based on our current borrowing rates for instruments with similar terms. The fair values of our other financial...

  • Page 99
    ...for the year ended December 31, 2009, included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at December 31, 2009 $ Note 7 - Common Stock 26,047 We have one class of common stock. Holders of shares of our common stock are entitled...

  • Page 100
    ...relevant by our Board of Directors. Note 8 - Income Taxes We are subject to income taxation in the United States and various state jurisdictions. Our tax years for 1998 through 2009 are subject to examination by the Internal Revenue Service. The components of the provision (benefit) for income taxes...

  • Page 101
    ...year period. In the event of an ownership change as defined in the Internal Revenue Code, utilization of our NOLs would be subject to an annual limitation 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...

  • Page 102
    ... 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, 2009 2008 2007 Numerator: Net income (loss) available to common stockholders Plus income effect of assumed-conversion interest on...

  • Page 103
    ...) 12,023 9,123 3,084 (1,530) Balance at January 1, 2007 Changes in fair value, net of income taxes Reclassification to earnings, net of income taxes Change in actuarial gains and losses, net of income taxes Balance at December 31, 2007 Changes in fair value, net of income taxes Reclassification to...

  • Page 104
    ... options, restricted stock awards and other securities to our officers, directors, key employees and consultants. Awards for the issuance of up to 3,899,094 shares remain outstanding under such plans. Vesting and the term of all options under the LTIP is determined by the Board of Directors and may...

  • Page 105
    ... the number of outstanding common shares. The total fair value of shares vested during the years ended December 31, 2009, 2008, and 2007, was $3.1 million, $3.2 million, and $4.1 million, respectively. Performance Stock Our Long-Term Incentive Plan provides for the grant of performance stock awards...

  • Page 106
    ... 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 2009, 2008, and 2007, the employees...

  • Page 107
    ...of 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 108
    ... - Quarterly Financial Data (Unaudited) Summarized quarterly financial data by quarter for 2009 and 2008 is as follows (in thousands, except per share data): Three Months Ended June 30 September 30 603,653 $ 66,166 (12,984) 79,150 78,438 0.65 $ 0.56 March 31 2009 Operating revenue Operating income...

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    ... 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...

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    ... statements of operations, cash flows and stockholders' equity of AirTran Holdings, Inc. for each of the three years in the period ended December 31, 2009 and our report dated February 11, 2010 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Orlando, Florida February 11, 2010...

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    .... PART III ITEM 10. Code of Ethics OTHER INFORMATION DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item is incorporated herein by reference to our 2010 Proxy Statement. Audit Committee Financial Expert The information required by this Item is incorporated...

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    ... FEES AND SERVICES The information required by this Item is incorporated herein by reference to our 2010 Proxy Statement. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE Page (a)(1) The following Consolidated Financial Statements of AirTran Holdings, Inc. are filed as part of this report...

  • Page 113
    ... ValuJet Airlines, Inc. dated December 6, 1995 (9) Agreement and Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (9) 1996 Stock Option Plan (10) Lease of headquarters in Orlando, Florida, dated November 14, 1995 (11) Orlando International Lease and Use...

  • Page 114
    ... Holdings, Inc. Amended and Restated Long Term Incentive Plan (15) Loan Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, The Parties Identified in Schedule 1 thereto, as Lenders, and The Royal Bank of Scotland plc, New York Brach ("RBS"), as Security Agent (16) Credit...

  • Page 115
    ... Revolving Line of Credit and Reimbursement Agreement (25) Statement regarding computation of ratio of earnings to fixed charges Subsidiaries of AirTran Holdings, Inc. Subsidiaries of AirTran Airways, Inc. Consent of Independent Registered Public Accounting Firm CEO certification pursuant to Rule 13...

  • Page 116
    ... by reference to the Annual Report on Form 10-K of Airways Corporation (Commission File No. 026432) for the year ended March 31, 1996, filed with the Commission on June 28, 1996. Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003...

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    ...the registrant has duly caused this report to be signed on its behalf by the 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 11, 2010 Pursuant to the requirements of...

  • Page 118
    /s/ John F. Fiedler John F. Fiedler Director /s/ Michael P. Jackson Michael P. Jackson Director /s/ Lewis H. Jordan Lewis H. Jordan Director /s/ Alexis P. Michas Alexis P. Michas Director February 11, 2010 February 11, 2010 February 11, 2010 February 11, 2010 109

  • Page 119
    ... ValuJet Airlines, Inc. dated December 6, 1995 (9) Agreement and Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (9) 1996 Stock Option Plan (10) Lease of headquarters in Orlando, Florida, dated November 14, 1995 (11) Orlando International Lease and Use...

  • Page 120
    ... Holdings, Inc. Amended and Restated Long Term Incentive Plan (15) Loan Agreement, dated as of August 31, 2005, by and among AirTran, as Borrower, The Parties Identified in Schedule 1 thereto, as Lenders, and The Royal Bank of Scotland plc, New York Brach ("RBS"), as Security Agent (16) Credit...

  • Page 121
    ... Revolving Line of Credit and Reimbursement Agreement (25) Statement regarding computation of ratio of earnings to fixed charges Subsidiaries of AirTran Holdings, Inc. Subsidiaries of AirTran Airways, Inc. Consent of Independent Registered Public Accounting Firm CEO certification pursuant to Rule 13...

  • Page 122
    ... on October 14, 2009. Incorporated by reference 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. Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31...

  • Page 123
    Exhibit 12.1 AIRTRAN HOLDINGS, INC. EXHIBIT 12.1 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (dollars in thousands) Year Ended December 31, 2004 Income (loss) before taxes and cumulative effect of change in accounting principle Add: Total fixed charges (per below) Less: ...

  • Page 124
    ... Delaware Nevada Delaware Delaware Delaware Delaware SUBSIDIARY NAME AirTran Airways, Inc. AirTran Investment Corporation AirTran 717 Leasing Corporation (1) AirTran Risk Management, Inc. (1) AirTran Fuel Services, Inc. (1) AirTran Gate Holdings, Inc. (1) (1) Subsidiary of AirTran Airways, Inc.

  • Page 125
    Exhibit 21.2 SUBSIDIARIES OF AIRTRAN AIRWAYS, INC. STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION Delaware Delaware Delaware Delaware SUBSIDIARY NAME AirTran 717 Leasing Corporation AirTran Risk Management, Inc. AirTran Fuel Services, Inc. AirTran Gate Holdings, Inc.

  • Page 126
    ... 2010, with respect to the consolidated financial statements of AirTran Holdings, Inc. and the effectiveness of internal control over financial reporting of AirTran Holdings, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2009. /s/ Ernst & Young LLP Orlando, Florida...

  • Page 127
    ...information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2010 By: /s/ Robert L. Fornaro Robert L. Fornaro President and Chief Executive Officer

  • Page 128
    ... design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have...

  • Page 129
    ... or 78o(d)) and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of AirTran Holdings, Inc. Date: February 11, 2010 By: /s/ Robert L. Fornaro Robert L. Fornaro President and Chief Executive Officer Date: February 11...

  • Page 130
    ... our Audit, Compensation, Nominating and Corporate Governance, and Financial Policy and Risk Committees are available free of charge on our Web site, http://www.airtran.com, or upon request by writing to: AirTran Holdings, Inc. Attn: Investor Relations 9955 AirTran Boulevard Orlando, Florida 32827

  • Page 131
    ... Atlanta MEXICO For schedules, go to airtran.com. Effective June 12, 2010 Routes and cities subject to change without notice. Some nonstop routes indicated operate seasonally and/or less than daily. * San Diego is served seasonally. AirTran Airways nonstop ï¬,ights Service provided by our partner...

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    2009 AIRTRAN HOLDINGS, INC.