Alaska Airlines and Horizon Air 2013 Annual Report Download - page 107

electronic tickets and the majority of our
customers check in using our website or our
airport kiosks. We depend on our reservation
system to be able to issue, track and accept
these electronic tickets. In order for our
operations to work efficiently, we must continue
to invest in new technology to ensure that our
website, reservation system, and check-in
systems are able to accommodate a high volume
of traffic, maintain secure information, and
deliver important flight information. Substantial
or repeated website, reservations system or
telecommunication systems failures or service
disruptions could reduce the attractiveness of
our services and cause our customers to do
business with another airline. In addition, we rely
on other automated systems for crew
scheduling, flight dispatch, and other operational
needs. Disruptions, untimely recovery, or a
breach of these systems could result in the loss
of important data, an increase of our expenses,
an impact on our operational performance, or a
possible temporary cessation of our operations.
If we do not maintain the privacy and security
of our information, we could damage our
reputation and incur substantial legal and
regulatory costs.
We accept, store, and transmit information about
our customers, our employees, our business
partners and our business. In addition, we
frequently rely on third-party hosting sites and
data processors, including cloud providers. Our
sensitive information relies on secure
transmission over public and private networks. A
compromise of our systems, the security of our
infrastructure, or those of other business partners
that result in our information being accessed or
stolen by unauthorized persons could adversely
affect our operations and our reputation.
FINANCIAL CONDITION AND FINANCIAL
MARKETS
Our business, financial condition, and results of
operations are substantially exposed to the
volatility of jet fuel prices. Increases in jet fuel
costs would harm our business.
Fuel costs constitute a significant portion of our
total operating expenses, accounting for 34%,
35% and 34% of total operating expenses for the
years ended 2013, 2012 and 2011,
respectively. Future increases in the price of jet
fuel may harm our business, financial condition
and results of operations, unless we are able to
increase fares and fees, or add additional
ancillary fees to attempt to recover increasing
fuel costs.
Certain of the Company’s financing agreements
have covenants that impose operating and
financial restrictions on the Company and its
subsidiaries.
Certain of our credit facilities and indentures
governing our secured borrowings impose certain
operating and financial covenants on us. Such
covenants require us to maintain, depending on
the particular agreement, minimum fixed charge
coverage ratios, minimum liquidity and/or
minimum collateral coverage ratios, and other
negative covenants customary for such
financings. A decline in the value of collateral
could result in a situation where we may not be
able to maintain the required collateral coverage
ratio.
Our ability to comply with these covenants may
be affected by events beyond our control,
including the overall industry revenue
environment and the level of fuel costs, and we
may be required to seek waivers or amendments
of covenants, repay all or a portion of the debt or
find alternative sources of financing.
Our maintenance costs will increase as our
fleet ages, and we will periodically incur
substantial maintenance costs due to the
maintenance schedules of our aircraft fleet.
As of December 31, 2013, the average age of
our NextGen aircraft (B737-800, -900, -900ERs)
was approximately 5.8 years, and the average
age of our Q400 aircraft was approximately
7.1 years. Our relatively new aircraft require less
maintenance now than they will in the future. Our
fleet will require more maintenance as it ages.
Additionally, during the current year we modified
one of our power-by-the-hour agreements and
terminated another agreement, meaning that we
could be more susceptible to variances in our
maintenance expense due to more expensive
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ŠForm 10-K