Alaska Airlines and Horizon Air 2009 Annual Report Download - page 152

We expect to pay for the four B737-800 aircraft
deliveries in 2010 with cash on hand. We expect
to pay for firm orders beyond 2010 and the
option aircraft, if exercised, through internally
generated cash, long-term debt, or operating
lease arrangements.
Contractual Obligations
The following table provides a summary of our principal payments under current and long-term debt
obligations, operating lease commitments, aircraft purchase commitments and other obligations as of
December 31, 2009.
(in millions) 2010 2011 2012 2013 2014
Beyond
2014 Total
Current and long-term debt obligations (excluding
the pre-delivery payment facility) ............. $156.0 $191.5 $236.3 $195.8 $162.6 $ 913.0 $1,855.2
Operating lease commitments (1) ............. 234.2 200.9 199.9 156.6 139.3 425.4 1,356.3
Aircraft purchase commitments ............... 121.0 91.0 144.7 143.0 56.2 32.9 588.8
Interest obligations (2) ...................... 100.6 99.4 88.6 73.3 61.8 184.0 607.7
Other obligations (3) ....................... 65.3 51.9 52.2 42.2 54.3 — 265.9
Total .................................... $677.1 $634.7 $721.7 $610.9 $474.2 $1,555.3 $4,673.9
(1) Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space,
and other equipment leases. The aircraft operating leases include lease obligations for three leased MD-80 aircraft and 16
leased Q200 aircraft, all of which are no longer in our operating fleets. We have accrued for these leases commitments
based on their discounted future cash flows as we remain obligated under the existing lease contracts on these aircraft.
(2) For variable-rate debt, future obligations are shown above using interest rates in effect as of December 31, 2009.
(3) Includes minimum obligations under our long-term power-by-the-hour maintenance agreements for all B737 engines other than
the B737-800.
Pension Obligations
The table above excludes contributions to our
various pension plans, which could be
approximately $45 million to $75 million per year
based on our historical funding practice,
although there is no minimum required
contribution in 2010. With the recent volatility in
market values, the fair value of plan assets has
fluctuated significantly in the past two years. In
2009, our plan assets recovered some of the
value lost with the market declines in 2008. As a
result of the partial value recovery and a
supplemental $100 million contribution to the
plan in December 2009, the unfunded liability for
our qualified defined-benefit pension plans was
$272.9 million at December 31, 2009 compared
to $444.9 million at December 31, 2008. This
results in a 76.9% funded status on a projected
benefit obligation basis compared to 59.4%
funded as of December 31, 2008.
Credit Card Agreements
We have agreements with a number of credit
card companies to process the sale of tickets
and other services. Under these agreements,
there are material adverse change clauses that,
if triggered, could result in the credit card
companies holding back a reserve from our
credit card receivables. Under one such
agreement, we could be required to maintain a
reserve if our credit rating is downgraded to or
below a rating specified by the agreement. Under
another such agreement, we would be obligated
to maintain a reserve if our cash balance fell
below $350 million. We are not currently
required to maintain any reserve under these
agreements, but if we were, our financial
position and liquidity could be materially harmed.
EFFECT OF INFLATION AND PRICE
CHANGES
Inflation and price changes other than for aircraft
fuel do not have a significant effect on our
operating revenues, operating expenses and
operating income.
RETURN ON INVESTED CAPITAL
We strive to provide a return to our investors that
exceeds the cost of the capital employed in our
business. Our target return on invested capital
56