Alaska Airlines and Horizon Air 2007 Annual Report Download - page 143

HORIZON AIR
Horizon reported a loss before income taxes of
$10.6 million during 2007 compared to income
before income taxes of $11.7 million in 2006.
The $22.3 million decrease is primarily due to
higher operating costs, including higher fuel
costs and fleet transition costs of $14.1 million,
partially offset by higher operating revenues.
There were several significant events in 2007
that impacted Horizon’s financial results,
including charges associated with the transition
of the Q200 fleet, a significant increase in
maintenance costs related to scheduled engine
overhauls, and the integration of the nine
regional jets from Frontier JetExpress into the
Horizon network. The extra capacity from the
Frontier JetExpress operations proved harder to
integrate than was originally planned because of
a softer revenue environment and unexpected
competition in some of our markets. Despite the
dramatic increase in capacity, load factor
declined only 0.7 points. However, the stable
load factor came at the expense of yield on flying
done under Horizon’s own brand, which declined
5.9%. In addition to assimilating the capacity
from the Frontier JetExpress flying, Horizon also
absorbed the operating costs for the returning
jets, including fuel costs, which were previously
the responsibility of Frontier.
HORIZON REVENUES
In 2007, operating revenues increased $74.4
million, or 11.6%, compared to 2006. Horizon’s
passenger revenues are summarized in the table
below:
Revenues
(in millions)
and % of ASMs
Years Ended December 31
2007 2006
Revenues %ASMs Revenues %ASMs
Passenger revenue
from Horizon
“brand” flying . . $391.3 52 $359.1 48
Revenue from CPA
with Alaska .... 283.4 35 n/a n/a
Passenger
revenue—
Alaska revenue
share
markets ...... n/a n/a 221.5 29
Revenue from CPA
with Frontier
JetExpress .... 34.5 13 52.5 23
Total Passenger
Revenue and %
of ASMs ...... $709.2 100% $633.1 100%
Horizon’s system-wide operating revenues per
ASM increased by 1.9% from 2006. The increase
was largely due to the shift in capacity out of
Frontier JetExpress flying (which produced
relatively low RASM because of the terms of the
contract and the longer-haul nature of the flying)
to higher RASM brand and Alaska CPA flying. As
mentioned earlier, the Frontier JetExpress
operation ceased in November 2007.
Line-of-business information is presented in the table below. In both CPA arrangements, Horizon is
insulated from market revenue factors and is guaranteed contractual revenue amounts based on
operational capacity. As a result, yield and load factor information for the CPA arrangements are not
presented.
Year Ended December 31, 2007
Capacity and Mix Load Factor Yield RASM
Actual
(000,000)
%
Change
Yr-over-Yr
Current
% Total
Point
Change
Yr-over-Yr Actual
Point
Change
Yr-over-Yr Actual
%
Change
Yr-over-Yr Actual
%
Change
Yr-over-Yr
Brand Flying .... 2,086 19.6 52% 4pts 71.8% (2.4)pts 26.14¢ (5.9) 19.20¢ (8.8)
Alaska CPA ..... 1,383 29.7 35% 6pts NM NM NM NM 20.49¢ (2.7)
Frontier CPA .... 509 (38.1) 13% (10)pts NM NM NM NM 6.77¢ 6.0
System Total . . . 3,978 9.5 100% —73.4% (0.7)pts 24.30¢ 3.3 18.06¢ 1.9
NM = Not meaningful
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ŠForm 10-K