Alaska Airlines and Horizon Air 2009 Annual Report Download - page 104
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As depicted in the charts below, our average raw fuel cost per gallon declined 43% in 2009, and
increased 42% and 8% in 2008 and 2007, respectively.
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
2002
2003
2004
2005
2006
2007
2008
2009
(in millions)
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
price per gallon
Total Raw Cost Price per gallon
Raw Fuel
Raw Fuel Cost as a Percentage
of Revenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
2002
2003
2004
2005
2006
2007
2008
2009
We use crude oil call options and jet fuel refining
margin swap contracts as hedges to decrease
our exposure to the volatility of jet fuel prices.
Call options effectively cap our pricing on the
crude oil component of fuel prices, limiting our
exposure to increasing fuel prices for about half
of our planned fuel consumption. With these call
option contracts, we still benefit from the decline
in crude oil prices, as there is no future cash
exposure above the premiums we pay to enter
into the contracts.
OUR AIRCRAFT ARE AMONG THE MOST FUEL-EFFICIENT IN THEIR
RESPECTIVE CLASSES.
We believe that operating fuel-efficient aircraft
also helps to mitigate the effect of high fuel
prices. Alaska operates an all-Boeing 737 fleet.
At Horizon, the long-term goal is to transition to
an all-Q400 turboprop fleet. Because of these
changes, Alaska’s fuel burn expressed in
available seat miles flown per gallon (ASMs/g)
improved from 65.9 ASMs/g in 2006 to 75.9
ASMs/g in 2009. Similarly, Horizon’s fuel burn
has improved from 51.7 ASMs/g in 2006 to
54.8 ASMs/g in 2009.
These reductions have not only reduced our fuel
cost, but also the amount of greenhouse gases
and other pollutants that our operations emit.
MARKETING AND COMPETITION
ALLIANCES WITH OTHER AIRLINES
We have marketing alliances with several airlines
that provide reciprocal frequent flyer mileage
credit and redemption privileges as well as code
sharing on certain flights as shown in the table
below. Alliances are an important part of our
strategy and enhance our revenues by:
• offering our customers more travel
destinations and better mileage credit/
redemption opportunities;
• offering our Mileage Plan program a
competitive advantage because of our
8