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AIRTRAN HOLDINGS INC (AAI)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/04/2011
Filed Period 12/31/2010

Table of contents

  • Page 1
    AIRTRAN HOLDINGS INC (AAI) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/04/2011 Filed Period 12/31/2010

  • Page 2
    ... 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 3
    ... in Rule 12b-2 of the Exchange Yes ¨ No x The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2010, was approximately $657 million (based on the last reported sale price on the New York Stock Exchange on that date). The number of shares outstanding...

  • Page 4
    ... from 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 filed with the Commission or, if no such proxy statement is timely filed, shall be included in an amendment to this annual report.

  • Page 5
    ... 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 Governance Executive...

  • Page 6
    ... 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 7
    ...disruption in U.S. and 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...

  • Page 8
    ... in a timely manner; and risks associated with a failure to consummate the merger with Southwest, including risks arising from costs incurred in contemplation of the merger or in connection with certain terminations of the merger agreement, risks arising from changes in customer mix, bookings, or...

  • Page 9
    ... seats offered. We operate scheduled airline service throughout the United States and to selected international locations. Approximately half of our flights originate or terminate at our largest hub in Atlanta, Georgia and we serve a number of markets with non-stop service from our hubs in Baltimore...

  • Page 10
    ... key operational areas of on-time arrivals, cancelled flights, baggage handling, involuntary denied boarding passengers, and customer complaints. While the assessment for 2010 is not yet available, for 2009, AirTran Airways was selected as the top low-cost carrier for the third consecutive year in...

  • Page 11
    ... fare structure user-friendly automated services for reservations, ticketing, and check-in through our: • award winning Web site, 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...

  • Page 12
    .... We, together with our marketing partner, currently serve 25 non-stop destinations to and from Milwaukee. • Increased flying to the Caribbean in 2010 by adding service to Montego Bay, Jamaica, and extended our Caribbean reach from Baltimore/Washington by adding new flights to San Juan, Puerto...

  • Page 13
    ... 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 the Caribbean and Mexico as well as...

  • Page 14
    ... flyer program ("A+ Rewards") offers a number of ways to earn free travel including the use of the AirTran VISA card, Hertz car rentals, and bonus earnings for Business Class travel. We believe this program creates brand loyalty and provides opportunities for incremental revenue through credit sales...

  • Page 15
    ... 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 16
    ...feature our destinations; quality of product, such as Business Class, GoGo onboard Internet service, XM radio, our young all Boeing aircraft fleet and assigned seating; everyday affordable fares; and special sales promotions. We also promote the use of airtran.com. Customers may book flights with us...

  • Page 17
    ... frequent flier program known as A+ Rewards. Our customers may earn either free roundtrip 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...

  • Page 18
    ... of the National Mediation Board. We also have many employees who are not represented by labor unions. Our customer service, ramp and reservations agents are not represented by labor unions and have rejected unionization by a substantial margin three times in the past eleven years. In December 2009...

  • Page 19
    ...While we believe the fuel efficiency of our fleet offers us an advantage over many of our competitors who operate less fuel-efficient aircraft, increases in fuel costs which are not offset by the impact of fuel-related derivative financial instruments or by fare increases will have an adverse effect...

  • Page 20
    ...(at the ticket counter, gate and baggage service office) and underwing services combined. Using our employees, we conduct complete ground handling services at 31 airports, including Atlanta. At other airports, the operations not conducted by our employees are contracted to other air carriers, ground...

  • 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
    ... 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 23
    ... adverse effect on our business, financial condition, results of operations and prospects, may cause actual results, events or performances to differ materially from those expressed in any forwardlooking statements we make in this annual report and may cause the value of our securities to decline...

  • Page 24
    ... 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 in most of the markets which we expect to serve within the coming year, we compete or expect...

  • Page 25
    ...with our international operations, including failure to adequately comply with existing U.S. legal requirements regulating foreign business practices. We have expanded our service to Mexico and various countries in the Caribbean. Operations outside the United States may subject us to increased legal...

  • Page 26
    ...have occurred in the United States, Mexico, and the Caribbean where we currently operate or plan to operate, could have a significant adverse impact on our operations and the demand for air travel both worldwide and in the countries in which we operate or may operate. Our operations will continue to...

  • Page 27
    ...: 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 28
    ... 10 years per aircraft. If BCC requires us to lease any such used B717 aircraft, we have the right to cancel a like number of B737 aircraft from our B737 order book with Boeing. There are multiple variables including capital market conditions, asset valuations, and our own operating performance that...

  • Page 29
    ...flows from operations for debt service payments, thereby reducing the availability of ...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...

  • Page 30
    ... on our business, including our financial condition, cash flows, and operations. We cannot assure you that we will be able to maintain our competitive low cost advantage. We believe we currently have among the lowest non-fuel operating costs of major U.S. air carriers on an aircraft stage length...

  • Page 31
    ... 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 32
    ... of our services and cause our customers to purchase travel from another airline. We rely on other automated systems for coordinating maintenance and engineering activities with flight operations and for crew scheduling, flight dispatch, and other operational needs. Disruption in, changes to, or...

  • Page 33
    ..., as our business continues to grow, we will need to attract and retain, and manage an increasing number of management-level employees. We cannot assure you that we will always be able to do so. Our ability to utilize net operating loss carry-forwards may be limited. At December 31, 2010, we had...

  • Page 34
    ...effect on our stock price and our future business and financial results. Uncertainty about the Merger, diversion of management attention or customer dissatisfaction with expected changes in our services, policies and customer benefits could harm us, whether or not the Merger is completed, and if the...

  • Page 35
    ... tax purposes. Changes in services, changes in sources of revenue, and branding or rebranding initiatives may involve substantial costs and may not be favorably received by customers, resulting in an adverse impact on the combined company's financial results, financial condition and stock price. 27

  • Page 36
    ..., and firm 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 32 gates and expires in September 2017. We...

  • Page 37
    ...the option to extend this ground lease for an additional five years. In May 2004, we opened a two bay hangar facility at Hartsfield-Jackson Atlanta International Airport. The hangar can hold three B717 aircraft simultaneously and has an office building attached to the hangar to house maintenance and...

  • Page 38
    ... 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 39
    ... of information currently available and consultation with legal counsel, management believes that resolution of such claims and litigation is not likely to have a material effect on the financial position, cash flows, or results of operations of the Company. The Company expenses legal costs as...

  • Page 40
    ... 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 2010 and 2009: 2010 Quarter 1st...

  • Page 41
    ... 10.35¢ Non-fuel operating cost per ASM (10) 6.75¢ Average cost of aircraft fuel per gallon (11) $ 2.33 Gallons of fuel burned (000's) 372,945 Operating aircraft in fleet at end of year 138 Average daily utilization (hours:minutes) (12) 11:00 Full-time equivalent employees at end of year 7,992 20...

  • Page 42
    ...a useful measure of an airline's unit operating expense which facilitates an understanding of operating costs over time. Total fuel expense, including taxes and into-plane fees, divided by gallons of fuel burned The average amount of time per day that an aircraft flown is operated in revenue service...

  • Page 43
    ... seats offered. We operate scheduled airline service throughout the United States and to selected international locations. Approximately half of our flights originate or terminate at our largest hub in Atlanta, Georgia and we serve a number of markets with non-stop service from our hubs in Baltimore...

  • Page 44
    ...domestic air carrier in the United States based on the number of originating passengers boarded. The acquisition, if consummated, will have material impacts on the business strategy, liquidity, operating results, financial commitments, and financial position of AirTran. The discussion in this report...

  • Page 45
    ...that we are enhancing the AirTran Airways travel experience by offering flights to these popular tourist destinations. Year 2010 Operating Results During 2010, we reported operating income of $128.2 million, net income of $38.5 million, and diluted earnings per common share of $0.26. During 2009, we...

  • Page 46
    ...2010 number one ranking among all major U.S. airlines was based on our performance in the key operational areas of on-time arrivals, cancelled flights, baggage handling, involuntary denied boarding passengers, and customer complaints. For 2010 and compared to 2009, AirTran Airways' traffic increased...

  • Page 47
    ... Completed a seven-year master lease agreement for facilities at Hartsfield-Jackson Atlanta International Airport; • Opened a pilot base in Orlando and pilot and flight attendant crew bases in Milwaukee, Wisconsin; • Successfully transitioned to a new, state-of-the-art System Operations Control...

  • Page 48
    ... at a slower rate than the last two years. If consummated, the proposed acquisition of AirTran by Southwest will have material impacts on the liquidity, sources and uses of liquidity, operating results, financial commitments, and financial position of AirTran. Air travel in our markets tends to be...

  • Page 49
    ... for the year ended December 31, 2010, increased $11.7 million (4.7 percent) compared to the year ended December 31, 2009. Other revenues include change and cancellation fees, direct booking fees, revenues derived from the sale of frequent flyer credits, baggage fees, preferred seat assignments and...

  • Page 50
    ... by changes in our capacity, as measured by available seat miles (ASMs). The following table summarizes our unit costs, as measured by CASM, for the indicated periods: Percent Increase Year ended December 31, 2010 2009 (Decrease) Aircraft fuel 3.61¢ 2.91¢ 24.1 Salaries, wages and benefits 2.20...

  • Page 51
    ... channels. Credit card commissions increased in large part due to increased unit revenue. Fees paid increased because there was a modest increase in tickets sold via global distribution systems and other channels. Aircraft insurance and security services expense increased 11.1 percent on a cost per...

  • Page 52
    ...discrete items related to restricted stock vesting. Non-deductible expense items and discrete items tend to increase the effective tax rate when pretax income is reported and tend to decrease the effective tax rate when a pre-tax loss is reported. During 2010, we reduced the valuation allowance with...

  • Page 53
    ...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, revenues derived from the sale of frequent flyer credits, baggage...

  • Page 54
    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 and certain terminal space. (Gain) loss on disposition of assets for the years ended December 31, 2009 and 2008 was ($3.0) million ...

  • Page 55
    ... 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, 2010, we reported net income of $38.5 million...

  • Page 56
    ... ended December 31, 2010. During the year ended December 31, 2009, cash was used as we increased prepaid and stored fuel by $18.3 million. Investing activities in 2010 used $24.2 million in cash compared to the $47.2 million cash used in 2009. Sales of available-for-sale securities are classified as...

  • Page 57
    ... operating performance. As of December 31, 2010, we were in compliance with our processing agreements and our two largest credit card processors were holding back no cash remittances from us. Our potential cash exposure to holdbacks by our largest two credit card processors, based on advance ticket...

  • Page 58
    ...: 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 59
    ... 10 years per aircraft. If BCC requires us to lease any such used B717 aircraft, we have the right to cancel a like number of B737 aircraft from our B737 order book with Boeing. There are multiple variables including capital market conditions, asset valuations, and our own operating performance that...

  • Page 60
    ... 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 61
    ... stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused NOLs in excess of the annual limitation may be carried over to later years. We believe that we were not subject to the limitations under Section 382. However, if AirTran is acquired by Southwest, the...

  • Page 62
    ... 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 63
    ... on 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, and car rental agencies. Revenue from the sale of credits is...

  • Page 64
    ... 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 65
    ... increase in fair value resulting from a hypothetical 100 basis point decrease in interest rates, was approximately $10.1 million as of December 31, 2010. Aviation Fuel Our results of operations can be significantly impacted by changes in the price and availability of aircraft fuel. Aircraft fuel...

  • Page 66
    ... which we pay a fixed rate per gallon and receive the monthly average price of jet fuel refinery costs. We provide counterparties to our derivative financial instrument arrangements with collateral when the fair value of our obligation exceeds specified amounts. As of December 31, 2010, we were not...

  • Page 67
    ... costs, our fuel expense (including taxes and into-plane fees) for 2011, before the impact of our derivative financial instruments, would increase approximately $9.6 million based on projected operations. The (1) estimated total ultimate cash benefit (use) of our fuel-related derivatives scheduled...

  • Page 68
    ... the cash benefit or use at the time of final settlement. Any collateral held by counterparties at the time a derivative financial instrument settles reduces any cash required from us at time of settlement. As of December 31, 2010 and January 21, 2010, we had provided no collateral for fuel-related...

  • Page 69
    ITEM 8. DATA FINANCIAL STATEMENTS AND SUPPLEMENTARY 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, 2010, 2009, and 2008 Consolidated Balance ...

  • Page 70
    ... years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), AirTran Holdings, Inc.'s internal control over financial reporting...

  • Page 71
    ... per share data) Year ended December 31, 2010 2009 2008 Operating Revenues: Passenger $2,354,954 $2,088,965 $2,413,609 Other 264,218 252,477 138,869 Total operating revenues 2,619,172 2,341,442 2,552,478 Operating Expenses: Aircraft fuel 867,538 678,835 1,194,938 Salaries, wages and benefits 528...

  • Page 72
    ...allowance for obsolescence of $4,505 and $3,602 at December 31, 2010 and 2009, respectively 19,846 16,133 Prepaid and stored fuel 26,339 34,338 Derivative financial...and trade names 21,567 21,567 Debt issuance costs 14,285 16,017 Prepaid aircraft rent 73,443 82,062 Derivative financial instruments 4,...

  • Page 73
    AirTran Holdings, Inc. Consolidated Balance Sheets (Continued) (In thousands) December 31, 2010 2009 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 57,793 $ 57,482 Accrued and other liabilities 173,174 145,174 Air traffic liability 251,945 226,891 Derivative financial ...

  • Page 74
    AirTran Holdings, Inc. Consolidated Statements of Cash Flows (In thousands) Year ended December 31, 2010 2009 2008 Operating activities: Net income (loss) $ 38,543 $ 134,662 $(266,334) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation ...

  • Page 75
    ... income Issuance of common stock for exercise of options Stock-based compensation Issuance of common stock under employee stock purchase plan Other Balance at December 31, 2010 • 379 1 5,807 • 1,146 • (26) 136 $ 594,033 $ See accompanying notes to Consolidated Financial Statements. 67

  • Page 76
    ...we offer only one service (i.e., air transportation), management has concluded that we only have one segment of business. Most of our revenues are earned in the United States. Business Through AirTran Airways, we offer scheduled airline services, using Boeing B717-200 aircraft (B717) and Boeing B737...

  • Page 77
    ... of credit for 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...

  • Page 78
    ... cost using the first-in, first-out method. 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...

  • Page 79
    ...recorded a charge of $8.4 million to write-off all of the gross carrying value of our goodwill during the second quarter of 2008. There have been no subsequent changes to goodwill and accumulated impairment losses as of December 31, 2010. We also performed the annual impairment test of the financial...

  • Page 80
    ... A+ Rewards Program to third parties, such as credit card companies, internet service providers, and car rental agencies. Revenue from the sale of credits is deferred and recognized as passenger revenue when transportation is expected to be provided, based on estimates of fair value of travel with...

  • Page 81
    ... services at various station locations, deicing costs and overnight costs for our flight crews, including hotel costs and per diem. Other operating expenses for 2010 include $18.6 million of legal fees and other costs incurred in connection with both the proposed acquisition of AirTran by Southwest...

  • Page 82
    ... about Fair Value Measurements". ASU 2010-06 requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and more disaggregation for the different types of financial instruments. This ASU became effective for annual and interim reporting periods...

  • Page 83
    ... 10 years per aircraft. If BCC requires us to lease any such used B717 aircraft, we have the right to cancel a like number of B737 aircraft from our B737 order book with Boeing. There are multiple variables including capital market conditions, asset valuations, and our own operating performance that...

  • Page 84
    ... 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, the processor to retain cash related to future...

  • Page 85
    ...various governmental authorities, including income taxes, transportation fees and taxes collected from our customers, property taxes, sales and use taxes, payroll taxes, and fuel taxes. The taxes and fees remitted by us are subject to review and audit by the applicable governmental authorities which...

  • Page 86
    ... No. 2010-CA-023117-O). The allegations in all eight complaints were similar. In each case, plaintiffs allege that the members of the board of directors of AirTran violated their fiduciary duties to the company by voting to approve the proposed merger and that AirTran, Southwest and Merger Sub aided...

  • Page 87
    ... primarily of amounts escrowed related to aircraft leases, letters of credit for airports and insurance, credit card holdbacks for advance ticket sales, derivative financial instruments, and cash escrowed for future interest payments. As of December 31, 2010, $15.3 million of restricted cash relates...

  • Page 88
    ..., we recorded a charge of $5.2 million to interest income for realized and unrealized losses related to our investments in available for sale securities. The majority of our receivables result from the sale of tickets to individuals, mostly through the use of major credit cards. These receivables...

  • Page 89
    ...31, 2010 was $479.1 million. The primary objective for our use of interest-rate swaps is to reduce the impact of the volatility of interest rates on our operating results. These interest-rate swap arrangements are accounted for as cash flow hedges. The ineffective portion of the change in fair value...

  • Page 90
    ... 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 91
    ... on this debt (weighted average fixed interest rate of 5.01%). As discussed below, we have a combined Credit Facility consisting of a letter of credit facility and a revolving line of credit facility. Maturities of debt for the next five years and thereafter, in aggregate, are (in millions): 2011...

  • Page 92
    ... commitments from a lender to finance a significant portion of the purchase price of two B737 aircraft scheduled for delivery to us in 2011 or 2012. During 2010, we refinanced the debt borrowed to acquire two B737 aircraft delivered to Airways in 2009. Under the refinancings, we repaid $49.0 million...

  • Page 93
    ... 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 days ending on the third business...

  • Page 94
    .... At December 31, 2010, the discount had been fully amortized. 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 in privately...

  • Page 95
    ... are entitled to the issuance by a financial institution of letters of credit up to a maximum aggregate amount of $50 million for the benefit of one or more of our credit card processors. Amounts borrowed under the revolving line of credit facility bear interest at a rate of 12 percent per annum and...

  • Page 96
    ...exchanged 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, 2010, 2009, and...

  • Page 97
    ... (908) Other property and equipment, net $ 3,327 The following schedule outlines the future minimum lease payments at December 31, 2010, under non-cancelable operating leases and capital leases with initial terms in excess of one year (in thousands): Capital Leases 4,067 $ 2,149 2,032 2,032 5,163...

  • Page 98
    ... be measured at fair value and are based on one or more of the three valuation techniques. The valuation techniques are as follows: (a) (b) (c) Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets; Cost approach. Amount that...

  • Page 99
    ...206) 49,327 Cash and cash equivalents Available-for-sale securities Interest rate derivatives Fuel derivatives $ 542,619 • $ 1,663 (10,206) • • • • 49,327 Market Market Market Market The financial statement carrying amounts and estimated fair values of our debt were as follows (in...

  • Page 100
    ...in the credit markets, there is an atypical element of uncertainty associated with valuing debt securities, including our debt securities. The estimated December 31, 2010 fair values of certain debt amounts were likely impacted by the proposed acquisition of AirTran by Southwest. Changes in our fuel...

  • Page 101
    ... deemed 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 1997 through 2010 are subject to examination by the Internal Revenue Service. Our effective income tax rate was 35.6 percent...

  • Page 102
    ... of the financial accounting for income taxes, our net operating loss carryforwards currently are available for use on our income tax returns to offset future taxable income. The components of the provision (benefit) for income taxes are as follows (in thousands): Year ended December 31, 2010 2009...

  • Page 103
    ... stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused NOLs in excess of the annual limitation may be carried over to later years. We believe that we were not subject to the limitations under Section 382. However, if AirTran is acquired by Southwest, the...

  • Page 104
    ... the effective tax rate. Note 9 - Earnings (Loss) Per Common Share 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, 2010 2009 2008 Numerator: Net income (loss) available to common...

  • Page 105
    ...quarter of 2009. Note 10 - Accumulated Other Comprehensive Income (Loss) Other comprehensive income (loss) is composed of changes in the fair value of certain of our derivative financial... financial ...Changes in fair value, net of income taxes Reclassification to earnings, net of income taxes Change...

  • Page 106
    ... by the Board of Directors and may vary by optionee; however, the term may be no longer than ten years from the date of grant. As of December 31, 2010, an aggregate of 6.0 million shares of restricted stock, performance shares, and options to acquire common stock remained available for future...

  • Page 107
    ... Long-Term Incentive Plan provides for the grant of performance share awards. In 2009 and 2010, performance share awards were made to certain officers based on AirTran's relative Total Shareholder Return (TSR) performance against a peer group of companies. The actual number of shares earned at the...

  • Page 108
    ... in effect, 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. We are authorized to issue up to 4 million shares of common stock under this plan. During 2010, 2009, and...

  • Page 109
    ... defined benefits to certain eligible employees. At December 31, 2010, the liability for the accumulated postemployment benefit obligations under the plans was $2.9 million, and unrecognized prior service costs and net actuarial gains were $2.6 million. Benefit expense under the plans was...

  • Page 110
    ... 2010 and June 2010. During the three months ended December 31, 2010, we incurred $12.9 million of legal fees and other expenses in connection with both the proposed acquisition of AirTran by Southwest Airlines and certain litigation. During the three months ended December 31, 2009, we recorded...

  • Page 111
    ... 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 112
    ... Registered Public Accounting Firm The Board of Directors and Stockholders of AirTran Holdings, Inc. We have audited the internal control over financial reporting of AirTran Holdings Inc. as of December 31, 2010, based on criteria established in Internal Control•Integrated Framework issued by...

  • Page 113
    ... Plans (c) Number of securities remaining available for future issuance under Number of securities to equity compensation be issued upon exercise plans (excluding of outstanding options, Weighted-average securities reflected in exercise price of restricted stock and column (a)) performance shares...

  • Page 114
    ...SERVICES The information required by this Item is incorporated herein by reference to our 2011 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 under Item...

  • Page 115
    ...of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (9) 10.4+ 1996 Stock Option Plan (10) 10.5 Lease of headquarters in Orlando, Florida, dated November 14, 1995 (11) 10.6 Orlando International Lease and Use Agreement (12) 10.7 Orlando Tradeport Maintenance Hangar...

  • Page 116
    ... 7, 2005, by and between AirTran, as Borrower, and HSH Nordbank AG, New York Branch, as Security Agent (17) Association of Flight Attendants • CWA, AFL-CIO, Flight Attendant Labor Contract with AirTran Airways, Effective June 1, 2005, Amendable December 1, 2008 (18) Credit Agreement, dated as of...

  • Page 117
    10.39* Loan Agreement [N344AT], dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York Branch, as Security Agent (19) 108

  • Page 118
    ... Amendment to the Employee Retention Plan, effective as of November 19, 2010 with the form of Retention Plan included as Exhibit A thereto. (27) Statement regarding computation of ratio of earnings to fixed charges Subsidiaries of AirTran Holdings, Inc. Subsidiaries of AirTran Airways, Inc. Consent...

  • Page 119
    (4) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (Commission File No. 1-15991), filed with the Commission on August 2, 2001. 109

  • Page 120
    ... reference to the Company's Registration Statement on Form S-3 (Commission File ...Annual Report on Form 10-K of Airways Corporation (Commission File No. 0-26432) for the year ended December 31, 1995. Incorporated by reference to the Quarterly Report on Form 10-Q of Airways Corporation for the quarter...

  • Page 121
    ... Act of 1934, 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 4, 2011 Pursuant to the...

  • Page 122
    /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 4, 2011 February 4, 2011 February 4, 2011 February 4, 2011 112

  • Page 123
    ... 2003 among AirTran Holdings, Inc., as issuer, AirTran Airways, Inc., ...Airlines, Inc. dated December 6, 1995 (9) 10.3 Agreement and Lease of Premises Central Passenger Terminal Complex Hartsfield Atlanta International Airport (9) 10.4+ 1996 Stock Option Plan (10) 10.5 Lease of headquarters in Orlando...

  • Page 124
    ... 7, 2005, by and between AirTran, as Borrower, and HSH Nordbank AG, New York Branch, as Security Agent (17) Association of Flight Attendants • CWA, AFL-CIO, Flight Attendant Labor Contract with AirTran Airways, Effective June 1, 2005, Amendable December 1, 2008 (18) Credit Agreement, dated as of...

  • Page 125
    ... Bank of Scotland Plc New York Branch, as Security Agent (19) Credit Agreement, dated as of August 1, 2006, by and among AirTran, as Borrower, Each Lender Identified in Schedule 1 thereto, as Lender, and The Royal Bank of Scotland Plc New York Branch, as Security Agent (19) Security Agreement, dated...

  • Page 126
    ... Amendment to the Employee Retention Plan, effective as of November 19, 2010 with the form of Retention Plan included as Exhibit A thereto. Statement regarding computation of ratio of earnings to fixed charges Subsidiaries of AirTran Holdings, Inc. Subsidiaries of AirTran Airways, Inc. Consent of...

  • Page 127
    115

  • Page 128
    ...(20) (21) (22) (23) 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 10-K. Incorporated by reference to the Company's Registration Statement on Form S-4, registration number 33-95232, filed with the...

  • Page 129
    ... 27, 2009. Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Commission File No. 1-15991), filed with the Commission on July 23, 2010. Incorporated by reference to the Company's report on Form 8-K (Commission File No. 1-15991), filed with...

  • Page 130
    EXHIBIT 12.1 AIRTRAN HOLDINGS, INC. EXHIBIT 12.1 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (dollars in thousands) 2005 Income (loss) before taxes and cumulative effect of change in accounting principle Add: Total fixed charges (per below) Less: Interest capitalized during the...

  • Page 131
    ... 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 132
    Exhibit 21.2 SUBSIDIARIES OF AIRTRAN AIRWAYS, INC. SUBSIDIARY NAME AirTran 717 Leasing Corporation AirTran Risk Management, Inc. AirTran Fuel Services, Inc. AirTran Gate Holdings, Inc. STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION Delaware Delaware Delaware Delaware

  • Page 133
    ... shares of its common stock, of our reports dated February 4, 2011, 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...

  • Page 134
    ... 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 135
    ... 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 136
    ...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 4, 2011 By: /s/ Robert L. Fornaro Robert L. Fornaro President and Chief Executive Officer /s/ Arne G. Haak Arne...

  • Page 137
    ... 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