Alaska Airlines and Horizon Air 2007 Annual Report Download - page 159

Two of the B737-800 aircraft were delivered
subsequent to December 31, 2007, but before
the filing of this Form 10-K. The two B737-800
were paid for with cash on hand. The remaining
B737-800 aircraft scheduled for delivery in 2008
are generally evenly spread throughout the rest
of the year, although weighted more toward the
last six months of the year. In addition to the 16
purchased aircraft above, Alaska has committed
to an operating lease arrangement with a third
party for one B737-800 to be delivered in March
2008. The three Q400s will be delivered in the
fourth quarter of 2008. Financing for ten of the
2008 B737-800 deliveries has already been
arranged. We expect to pay for the remaining
deliveries with cash on hand. In January 2008,
we obtained financing for 13 of the recently
delivered Q400 aircraft, resulting in net proceeds
from borrowings of $193 million.
Our agreements with Boeing and Bombardier
provide us with flexibility to adjust aircraft
deliveries in the future should we wish to
accelerate or slow our growth.
Contractual Obligations
The following table provides a summary of our principal payments under current and long-term debt
obligations, capital lease obligations, operating lease commitments, aircraft purchase commitments
and other obligations as of December 31, 2007. This table excludes contributions to our various
pension plans, which we expect to be approximately $50 million to $75 million per year through 2012.
Beyond
(in millions) 2008 2009 2010 2011 2012 2012 Total
Current and long-term debt
obligations (excluding the
pre-delivery payment facility).... $ 90.1 $ 94.8 $100.3 $133.3 $175.5 $ 620.7 $1,214.7
Current and long-term portions of
the pre-delivery payment
facility ..................... 85.8 ———— — 85.8
Operating lease
commitments (1) ............ 256.2 231.5 216.6 177.5 178.2 526.2 1,586.2
Aircraft purchase commitments . . . 491.6 355.3 157.9 44.9 — — 1,049.7
Interest obligations (2) .......... 80.6 69.2 62.9 56.3 47.3 130.1 446.4
Other obligations (3) ........... 29.7 30.0 30.3 30.6 30.9 62.7 214.2
Total ........................ $1,034.0 $780.8 $568.0 $442.6 $431.9 $1,339.7 $4,597.0
(1) Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space,
and other equipment leases. The aircraft operating leases include lease obligations for four leased MD-80 aircraft, all of
which we intend to retire earlier than expected in connection with our fleet transition plan.
(2) For variable-rate debt, future obligations are shown above using interest rates in effect as of December 31, 2007.
(3) Includes minimum obligations under our long-term power-by-the-hour maintenance agreement, but excludes $27.9 million of
unrecognized tax benefits for which we cannot make a reasonably reliable estimate of the amount and period of payment.
See Note 13 to the consolidated financial statements.
EFFECT OF INFLATION AND PRICE
CHANGES
Inflation and price changes other than for aircraft
fuel do not have a significant effect on our
operating revenues, operating expenses and
operating income.
OTHER
We strive to provide a return to our investors that
exceeds the cost of the capital employed in our
business. Our targeted return on invested capital
(ROIC) is 10%. We have not historically reached
this threshold, nor did we in 2007. However, our
strategic plan is built on the premise of providing
an appropriate return to all capital providers.
59
ŠForm 10-K