Alaska Airlines and Horizon Air 2007 Annual Report Download - page 137

Operating Revenue—Mainline
Mainline passenger revenue increased 3.8% on a
4.0% increase in available seat miles offset by a
modest decline in mainline passenger revenue
per available seat mile (PRASM). The slight
decline in PRASM was the result of a 0.3%
increase in yields, offset by a 0.4-point decline in
load factor compared to 2006.
Although the load factor for the full year was
down from 2006, load factors outpaced 2006 in
the second half of the year after lagging 2006 in
the first half of the year. These load factor
improvements contributed to the increase in unit
passenger revenue (PRASM) seen in the third
and fourth quarters. We believe the full-year load
factor decline is due to capacity growth in
connection with the replacement of older aircraft
with larger B737-800 aircraft without a
commensurate increase in the number of
passengers. Our advance bookings currently
suggest that load factors will be up 2 to 3 points
in the first quarter of 2008 compared to the
same period in 2007.
Load Factor by Quarter
70%
72%
74%
76%
78%
80%
Q1
Q2
Q3
Q4
2006 2007
PRASM by Quarter
8.00
9.00
10.00
11.00
12.00
Q1 Q2
Q3
Q4
2006 2007
Freight and mail revenue was flat compared to
2006. This is primarily due to a decline in freight
and mail volumes resulting from lower capacity
that stemmed from the delay in the conversion of
four of our B737-400 passenger aircraft to combi
aircraft, offset by an increase in cargo yields,
including those coming through fuel surcharges.
We currently anticipate an increase in freight and
mail revenues in 2008 as we expect to deploy
our full capacity for the entire year.
Other—net revenues increased $17.5 million, or
13.5%, primarily as a result of higher
commission revenue associated with the sale of
mileage credits to our bank partner. When we
sell mileage credits, we defer the majority of the
proceeds and recognize that revenue when
award travel takes place. Commission revenue
represents the difference between the proceeds
from the sale of miles and the amount we defer.
Passenger Revenue—Purchased Capacity
Passenger revenue—purchased capacity
increased by $265.0 million to $281.4 million
because of the CPA with Horizon.
Although the markets subject to the CPA have
changed slightly compared to those included
under the prior revenue-sharing arrangement, we
believe it is useful to evaluate year-over-year
revenue information to gauge actual trends in
those markets. This factors out the impact of the
intercompany capacity purchase agreement and,
as a result, gives readers information about the
aggregate impact to Air Group revenues. In
2006, Horizon recorded $221.5 million in
revenues for markets covered by the prior
revenue- sharing arrangement. Yields in those
markets declined 3.3% and load factor increased
1.5 points on a 29.7% increase in capacity.
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ŠForm 10-K