Alaska Airlines and Horizon Air 2007 Annual Report Download - page 171

collective bargaining agreements. Approximately
14% and 46% of Alaska and Horizon employees,
respectively, are covered under agreements that
are currently in negotiations or become
amendable prior to December 31, 2008.
The airline industry is characterized by high fixed
costs. Small fluctuations in load factors and
yield (a measure of ticket prices) can have a
significant impact on operating results. The
Company has been and continues working to
reduce unit costs to better compete with carriers
that have lower cost structures.
Substantially all of Alaska’s and Horizon’s sales
occur in the United States. See Note 15 for
operating segment information and geographic
concentrations.
Reclassifications
Certain reclassifications have been made to
conform the prior year’s data to the current
format.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid
investments with original maturities of three
months or less. They are carried at cost, which
approximates market. The Company reduces
cash balances when checks are disbursed. Due
to the time delay in checks clearing the banks,
the Company normally maintains a negative
balance in its cash disbursement accounts,
which is reported as a current liability. The
amount of the negative cash balance was $22.3
million and $29.7 million at December 31, 2007
and 2006, respectively, and is included in
accounts payable.
Securities Lending
From time to time, the Company lends certain
marketable securities to third parties for a period
of less than one year to enhance investment
income. During the time period in which these
securities are loaned to the third parties, the
Company requires cash collateral for 102% of
the daily market value of the loaned securities.
This cash collateral is restricted and is deposited
with a lending agent and invested by that agent
in accordance with the Company’s guidelines.
The Company maintains full ownership rights to
the securities loaned and continues to earn
interest and appreciation on them. As of
December 31, 2007 and 2006, the Company
had $109.8 million and $108.4 million of
securities on loan under the program. These
affected securities are included as marketable
securities in the consolidated balance sheets.
Receivables
Receivables consist primarily of airline traffic
(including credit card) receivables, amounts from
customers, mileage plan partners, government
tax authorities, and other miscellaneous
amounts due to the Company, and are net of an
allowance for doubtful accounts. Management
determines the allowance for doubtful accounts
based on known troubled accounts and historical
experience applied to an aging of accounts.
Inventories and Supplies—net
Expendable aircraft parts, materials and supplies
are stated at average cost and are included in
inventories and supplies-net. An obsolescence
allowance for expendable parts is accrued based
on estimated lives of the corresponding fleet
type and salvage values. Surplus inventories are
carried at their net realizable value. The
allowance for all non-surplus expendable
inventories was $24.6 million and $20.5 million
at December 31, 2007 and 2006, respectively.
Inventory and supplies-net also includes fuel
inventory of $6.6 million and $7.2 million at
December 31, 2007 and 2006, respectively.
Repairable and rotable aircraft parts inventory
are included in flight equipment.
71
ŠForm 10-K