Alaska Airlines and Horizon Air 2007 Annual Report Download - page 7

We plan to replace the 37-seat Q200s with 76-seat
Q400s. The Q400 provides twice as many seats for
just a third more in operating cost, resulting in
significantly lower unit costs. Lower unit costs
mean we can offer lower fares and stimulate new
traffic in some of our markets, such as the Seattle-
Portland shuttle where our primary competition is
the automobile.
To see why Horizon’s shuttle service beats driving, go to
www.I-5slog.com
We’re striving to make our operation as efficient as
possible to better serve our customers, and this
year we are making some significant investments at
Alaska and Horizon that will lay the foundation for
long-term service and cost benefits. We are focused
on improving Alaska’s on-time and baggage-
handling performance in Seattle and are already
beginning to see results from some of the changes
we’ve made. At Horizon, where an unusually high
level of planned maintenance contributed to a cost
“bubble” in 2007, we are working hard to operate
more efficiently and improve our cost structure.
The rising price of fuel has presented its own set of
challenges. With crude oil at $65 per barrel in
March 2007, who would have guessed we’d be
looking at $100 or more per barrel just one year
later. Fuel is now our largest expense, accounting
for 28 percent of Alaska Air Group’s total operating
expense on an economic basis in 2007. And even
though Alaska was able to grow while consuming
the same amount of fuel as the year before
(through our transition to more fuel-efficient
737-800s), the airline’s fuel bill still rose by about
$145 million in 2007 — and that’s after a $53.4
million benefit from our fuel hedges.
Of course, the best way to control our fuel expense
is to not burn it in the first place. Completing
Alaska’s fleet transition later this year means we
will have one of the lowest fuel costs per available
seat mile in the industry at a time when it matters
most. And Horizon’s fleet changes will translate
into better fuel efficiency, as well.
Alaska Airlines Fleet
Fuel Consumption by
Narrow-body Jet Aircraft Type
737-900
172 seats
737-800
157 seats
A320
149 seats
757-200
182 seats
737-700
124 seats
737-400
144 seats
A319
122 seats
MD-80*
140 seats
DC-9
140 seats
10
11
12
13
14
15
16
17
Gallons/Seat
Type of Aircraft
*Alaska will retire its MD-80 fleet in 2008.
Based on nominal fuel burn for a trip length of 1,000 statute miles.
Assumes 100% load factor and 220 lbs for each passenger plus bag.
Source: The Boeing Company
3