Alaska Airlines and Horizon Air 2007 Annual Report Download - page 119

from sales and marketing efforts in those
regions. As a result, we remain highly dependent
on our key markets. Our business would be
harmed by any circumstances causing a
reduction in demand for air transportation in our
key markets. An increase in competition in our
key markets could also cause us to reduce fares
or take other competitive measures that could
harm our business, financial condition and
results of operations.
The airline industry continues to face potential
security concerns and related costs.
The terrorist attacks of September 11, 2001 and
their aftermath have negatively affected the
airline industry, including our company. More
recently, the foiled terror plot in the United
Kingdom in August 2006 resulted in new security
measures that also impacted our company.
Additional terrorist attacks, the fear of such
attacks or other hostilities involving the U.S.
could have a further significant negative effect on
the airline industry, including us, and could:
• significantly reduce passenger traffic and
yields due to a potentially dramatic drop
in demand for air travel;
• significantly increase security and
insurance costs;
• make war risk or other insurance
unavailable or extremely expensive;
• increase fuel costs and the volatility of
fuel prices;
• increase costs from airport shutdowns,
flight cancellations and delays resulting
from security breaches and perceived
safety threats; and
• result in a grounding of commercial air
traffic by the FAA.
The occurrence of any of these events would
harm our business, financial condition and
results of operations.
Increases in insurance costs or reductions in
insurance coverage would harm our business,
financial condition and results of operations.
Immediately following the September 11, 2001
terrorist attacks, aviation insurers dramatically
increased airline insurance premiums and
significantly reduced the insurance coverage
available to airlines for third-party claims
resulting from acts of terrorism, war or similar
events to $50 million per event and in the
aggregate. In light of this development, under the
Air Transportation Safety and System
Stabilization Act and the Homeland Security Act
of 2002, as most recently amended by the
Consolidated Appropriations Act of 2008, the
U.S. government continues to offer domestic
airlines either (i) third-party liability war risk
coverage above $50 million, or (ii) in lieu of
commercial war risk insurance, full hull,
comprehensive and third-party liability war risk
coverage. This coverage provides for the same
limits of war and allied perils coverage for hull
and comprehensive insurance and twice the
limits of third-party liability insurance carried by
the airline on September 11, 2001.
Although our insurance costs have declined to
pre-2001 levels, aviation insurers could increase
their premiums again in the event of additional
terrorist attacks, hijackings, airline accidents or
other events adversely affecting the airline
industry. Furthermore, the full hull,
comprehensive and third-party war risk insurance
provided by the government is currently
mandated through August 31, 2008. Although
the government may extend the deadline for
providing such coverage, we cannot be certain
that any extension will occur, or if it does, for
how long the extension will last. It is expected
that, should the government stop providing such
coverage to the airline industry, the premiums
charged by aviation insurers for this coverage will
be substantially higher than the premiums
currently charged by the government and the
coverage will be much more limited, including
smaller aggregate limits and shorter cancellation
periods. Significant increases in insurance
premiums would adversely affect our business,
financial condition and results of operations.
Our reputation and financial results could be
harmed in the event of an airline accident or
incident.
An accident or incident involving one of our
aircraft could involve a significant loss of life and
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ŠForm 10-K