Alaska Airlines and Horizon Air 2013 Annual Report Download - page 108

scheduled maintenance, foreign object damage,
unplanned engine removal or other unplanned
maintenance event. Any significant increase in
maintenance expenses could have a material
adverse effect on our results of operations.
BRAND AND REPUTATION
As we evolve our brand to appeal to a changing
demographic and grow into new markets, we
will engage in strategic initiatives that may not
be favorably received by all customers.
We continue to focus on strategic initiatives
designed to increase our brand appeal to a
diverse and evolving demographic of airline
travelers. These efforts could include significant
improvements to our in-airport and on-board
environments, increasing our direct customer
relationships through improvements to our
purchasing portals (digital and mobile), and
optimization of our customer loyalty programs.
In pursuit of these efforts we may negatively
affect our reputation with some of our existing
customer base.
LABOR RELATIONS AND LABOR STRATEGY
A significant increase in labor costs,
unsuccessful attempts to strengthen our
relationships with union employees, or loss of
key personnel could adversely affect our
business and results of operations.
Labor costs are a significant component of our
total expenses, accounting for approximately
42%, 42% and 41% of our non-fuel operating
expenses in 2013, 2012 and 2011,
respectively. Each of our represented employee
groups has a separate collective bargaining
agreement, and could make demands that would
increase our operating expenses and adversely
affect our financial performance if we agree to
them. The same result could apply if we
experience a significant increase in vendor labor
costs that ultimately flow-through to us.
As of December 31, 2013, labor unions
represented approximately 83% of Alaska’s and
49% of Horizon’s employees. Although we have
been successful in maturing communications,
negotiating approaches, and other strategies to
enhance workforce engagement in the
Company's long-term vision, future uncertainty
around open contracts could be a distraction,
affecting employee focus in our business and
diverting management’s attention from other
projects and issues.
We compete against the major U.S. airlines and
other businesses for labor in many highly skilled
positions. If we are unable to hire, train and
retain qualified employees at a reasonable cost,
sustain employee engagement in the Company's
strategic vision, or if we are unsuccessful at
implementing succession plans for our key staff,
we may be unable to grow or sustain our
business. In such case, our operating results
and business prospects could be harmed.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
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