Alaska Airlines and Horizon Air 2009 Annual Report Download - page 130

ALASKA AIRLINES
Alaska reported income before income taxes of
$183.8 million in 2009 compared to a loss
before income taxes of $153.3 million in 2008.
Excluding certain items as noted in the table
below, Alaska would have reported income
before income taxes of $145.9 million in 2009,
compared to $25.2 million in 2008. See the
previous discussion under “Adjusted Non-GAAP
Earnings and Per-Share Amounts” for additional
information about these non-GAAP measures.
Years Ended December 31
(in millions) 2009 2008
Income before income taxes,
excluding items below ...... $145.9 $ 25.2
Change in Mileage Plan
terms ................... —42.3
New pilot contract transition
costs ................... (35.8) —
Restructuring charges ........ —(12.9)
Fleet transition costs –
MD-80 .................. —(47.5)
Mark-to-market fuel hedge
adjustments ............. 73.7 (118.9)
Realized losses on hedge
portfolio restructuring ...... —(41.5)
Income (loss) before income
taxes as reported ......... $183.8 $(153.3)
The discussion below outlines significant
variances between the two periods.
ALASKA REVENUES
Total operating revenues declined $215.3
million, or 6.7%, during 2009 compared to
2008. The changes are summarized in the
following table:
Years Ended December 31
(in millions) 2009 2008
%
Change
Passenger revenue—
mainline............. $2,438.8 $2,643.7 (7.8)
Freight and mail ........ 91.5 99.3 (7.9)
Other—net ............ 187.3 135.2 38.5
Change in Mileage Plan
terms ............... —42.3 NM
Total mainline operating
revenues ............ $2,717.6 $2,920.5 (6.9)
Passenger revenue—
purchased capacity .... 288.4 300.8 (4.1)
Total operating
revenues ............ $3,006.0 $3,221.3 (6.7)
NM = Not Meaningful
Operating Revenues—Mainline
Mainline passenger revenue in 2009 fell by 7.8%
on a 4.4% reduction in capacity. There was a
3.5% decline in PRASM, which was driven by a
6.0% drop in ticket yield compared to 2008,
partially offset by a two-point increase in load
factor.
Passenger revenues were also bolstered by the
implementation of our first-checked-bag fee in
the third quarter of 2009 ($34.5 million) and the
full-year impact of our second-checked-bag fee
implemented in the third quarter of 2008,
partially offset by a decline in other fees that
resulted from fewer passengers.
Freight and mail revenue decreased $7.8 million,
or 7.9%, primarily as a result of lower mail
volumes and yield and lower freight fuel
surcharges because of the decline in fuel prices
in 2009, partially offset by higher freight volumes
and better freight pricing.
Other—net revenue increased $52.1 million, or
38.5%, from 2008. Mileage Plan revenue
increased by $50.0 million primarily because of
an increase in the rate paid to us by our credit
card partner under the affinity card agreement
and an increase in the number of miles needed
to redeem a travel award. This change reduces
our estimate of the fair value of a mile and
results in a lower amount deferred as a liability
for future travel and increases the amount of
commission revenue we record when miles are
sold.
Passenger Revenue—Purchased Capacity
Passenger revenue—purchased capacity flying
fell by $12.4 million over the same period of last
year because of a 2.6% decline in capacity
combined with a 1.6% decrease in unit revenue
compared to the prior year. Unit revenue dropped
as a result of a 1.3-point decline in load factor
on flat ticket yield.
ALASKA EXPENSES
For 2009, total operating expenses decreased
$573.0 million or 17.1% compared to 2008 as a
result of lower mainline operating costs, most
notably aircraft fuel and fleet transition charges,
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