Alaska Airlines and Horizon Air 2009 Annual Report Download - page 141

ALASKA REVENUES
Total operating revenues increased $151.4
million, or 4.9%, in 2008 as compared to 2007.
The components of Alaska’s revenue are
summarized in the following table:
Years Ended December 31
(in millions) 2008 2007
%
Change
Passenger revenue—
mainline ............ $2,643.7 $2,547.2 3.8
Freight and mail ........ 99.3 94.2 5.4
Other—net ............ 135.2 147.1 (8.1)
Change in Mileage Plan
terms ............... 42.3 —NM
Total mainline operating
revenues ............ $2,920.5 $2,788.5 4.7
Passenger revenue—
purchased capacity .... 300.8 281.4 6.9
Total operating
revenues ............ $3,221.3 $3,069.9 4.9
NM = Not Meaningful
Operating Revenue—Mainline
Mainline passenger revenue increased 3.8% on
flat capacity and a 3.7% increase in passenger
revenues per available seat mile (PRASM). The
increase in mainline PRASM was the result of a
2.3% increase in yields and a 1.1-point increase
in load factor compared to the prior-year period.
An increase in Mileage Plan redemption revenue
and higher ancillary fee revenue contributed
significantly to the increase in yields compared
to 2007.
Freight and mail revenues increased $5.1 million,
or 5.4%, over 2007. The increase is due to
increased yields for freight and mail and freight
fuel surcharges, partially offset by a decline in
freight volumes compared to the prior year.
Other—net revenues declined $11.9 million, or
8.1%, primarily as a result of lower commission
revenue on the sale of Mileage Plan miles to our
non-airline partners.
Change in Mileage Plan Terms
Beginning in August 2008, we reduced the length
of time that a Mileage Plan account could be
inactive from three years to two years before the
account is deleted. As a result of this change in
terms, our Mileage Plan liability was reduced by
$42.3 million. This benefit is recorded separately
in operating revenues as “Change in Mileage
Plan terms.”
Passenger Revenue—Purchased Capacity
Passenger revenue—purchased capacity
increased by $19.4 million over the same period
in 2007 because of a 5.7% increase in unit
revenues on relatively flat capacity. Unit
revenues increased due to a 6.8% increase in
yields, offset by a 0.7-point decline in load
factors compared to 2007.
ALASKA EXPENSES
For the year, total operating expenses increased
$494.1 million, or 17.3%, compared to 2007 as
a result of higher mainline operating costs, most
notably aircraft fuel expense (including hedging
gains and losses), fleet transition charges and
restructuring charges. We believe it is useful to
summarize operating expenses as follows, which
is consistent with the way expenses are reported
internally and evaluated by management.
Years Ended December 31
(in millions) 2008 2007
%
Change
Mainline operating
expenses ........... $3,036.5 $2,553.3 18.9
Purchased capacity
costs .............. 313.7 302.8 3.6
Total Operating
Expenses ........... $3,350.2 $2,856.1 17.3
Mainline Operating Expenses
Significant mainline operating expense variances
are described below.
Wages and Benefits
Wages and benefits decreased during the full
year of 2008 by $11.2 million, or 1.5%, primarily
as a result of lower defined-benefit pension
costs, reduced overtime, and a 0.5% decrease in
full-time equivalent employees compared to
2007.
Variable Incentive Pay
Variable incentive pay for 2008 increased $2.3
million or 17.0%, compared to 2007. The
increase is primarily due to higher payouts under
our Operational Performance Reward program,
offset by lower overall payouts in our profit-
sharing plans due to the decline in profitability
from 2007.
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