Alaska Airlines and Horizon Air 2009 Annual Report Download - page 149

(from 5.85% to 5.35%) would increase our
projected benefit obligation at December 31,
2009 by approximately $89.1 million and
increase estimated 2010 pension expense by
approximately $8.3 million.
All of our defined-benefit pension plans are now
closed to new entrants with the ratification of the
new Alaska pilot collective bargaining agreement
in 2009.
Future changes in plan asset returns, assumed
discount rates and various other factors related
to the participants in our pension plans will
impact our future pension expense and
liabilities. We cannot predict what these factors
will be in the future.
LONG-LIVED ASSETS
As of December 31, 2009, we had approximately
$3.2 billion of property and equipment and related
assets, net of accumulated depreciation. In
accounting for these long-lived assets, we make
estimates about the expected useful lives of the
assets, changes in fleet plans, the expected
residual values of the assets, and the potential
for impairment based on the fair value of the
assets and the cash flows they generate. Factors
indicating potential impairment include, but are
not limited to, significant decreases in the market
value of the long-lived assets, management
decisions regarding the future use of the assets,
a significant change in the long-lived assets
condition, and operating cash flow losses
associated with the use of the long-lived asset.
In 2007, Horizon announced plans to phase out
its remaining leased Q200 aircraft. All of these
aircraft were leased under operating lease
agreements. As a result of this decision, we
reassessed the depreciable lives and salvage
values of the related rotable and repairable
Q200 parts and, as such, have depreciated
these parts down to their estimated salvage
value. We are in the process of disposing of
these parts.
In 2008, Horizon announced plans to ultimately
exit its CRJ-700 fleet and transition to an
all-Q400 fleet, dependent on the ability to
remarket the CRJ-700 aircraft. As a result of the
decision, we determined that the two owned
CRJ-700s were impaired and recorded an
impairment charge on the aircraft and their
related spare parts of $5.5 million in 2008 to
reduce the carrying value of these assets to their
estimated fair value. We have reassessed the
depreciable lives and salvage values of the two
owned aircraft and the related spare parts and
are depreciating those assets over their
remaining estimated useful lives.
There is inherent risk in estimating the fair value
of our aircraft and related parts and their salvage
values at the time of impairment. Actual
proceeds upon disposition of the aircraft or
related parts could be materially less than
expected, resulting in additional loss. Our
estimate of salvage value at the time of disposal
could also change, requiring us to increase the
depreciation expense on the affected aircraft.
PROSPECTIVE ACCOUNTING
PRONOUNCEMENTS
New accounting standards on “Revenue
Arrangements with Multiple Deliverables” were
issued in September 2009 and update the
current guidance pertaining to multiple-element
revenue arrangements. This new guidance will be
effective for our annual reporting period
beginning January 1, 2011. We are currently
evaluating the impact of this new standard on
our financial position, results of operations, cash
flows, and disclosures.
LIQUIDITY AND CAPITAL
RESOURCES
Our primary sources of liquidity are:
• Expected cash from operations;
• Aircraft financing – the nine unencumbered
aircraft in our operating fleet that could be
financed, if necessary and if financing is
available with terms that are acceptable to
us;
• Our $185 million bank line-of-credit facility;
• Our $80 million pre-delivery payment facility;
• Other potential sources such as the
financing of aircraft parts or receivables or a
“forward sale” of mileage credits to our
bank partner.
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ŠForm 10-K