Alaska Airlines and Horizon Air 2013 Annual Report Download - page 117

In January 2014, our load factors were down 0.3 pts compared to January 2013. Our advance bookings
suggest our load factors will be down 1 pt in February and 3 pts in March compared to the same
periods in 2013. Our current expectations for capacity and operating costs per ASM are summarized
below:
Forecast
Q1 2014
Change
Y-O-Y
Forecast Full
Year 2014
Change
Y-O-Y
Consolidated:
Capacity (ASMs in millions) ........................................ 8,325 - 8,375 ~4.5% 35,250 - 35,750 ~5.5%
Cost per ASM excluding fuel and special items (cents) .................. 9.00¢ - 9.05¢ ~4.5% 8.52¢ - 8.57¢ ~1.0%
Mainline:
Capacity (ASMs in millions) .................................... 7,475 - 7,525 ~4.0% 31,750 - 32,250 ~5.0%
Cost per ASM excluding fuel and special items (cents) .............. 8.00¢ - 8.05¢ ~6.0% 7.62¢ - 7.67¢ ~1.5%
RESULTS OF OPERATIONS
2013 COMPARED WITH 2012
Our consolidated net income for 2013 was $508
million, or $7.16 per diluted share, compared to
net income of $316 million, or $4.40 per diluted
share, in 2012. Significant items impacting the
comparability between the periods are as follows:
• Both periods include adjustments to reflect
the timing of net unrealized mark-to-market
gains or losses related to our fuel hedge
positions. For 2013, we recognized net mark-
to-market gains of $8 million ($5 million after
tax, or $0.06 per diluted share) compared to
losses of $38 million ($23 million after tax, or
$0.33 per share) in 2012.
• In 2013, we recognized a one-time, non-
cash Special mileage plan revenue item of
$192 million ($120 million after tax, or
$1.70 per diluted share) that resulted from
the application of new accounting rules
associated with the modified Bank of
America Affinity Card Agreement, and the
effect of an increase in the estimate of the
number of frequent flier miles expected to
expire unused.
ADJUSTED (NON-GAAP) RESULTS AND
PER-SHARE AMOUNTS
We believe disclosure of earnings excluding the
impact of mark-to-market gains or losses or other
individual revenues or expenses is useful
information to investors because:
• We believe it is the basis by which we are
evaluated by industry analysts;
• By eliminating fuel expense and certain
special items from our unit metrics, we
believe that we have better visibility into the
results of our non-fuel continuing
operations. Our industry is highly
competitive and is characterized by high
fixed costs, so even a small reduction in
non-fuel operating costs can result in a
significant improvement in operating results.
In addition, we believe that all domestic
carriers are similarly impacted by changes in
jet fuel costs over the long run, so it is
important for management (and thus
investors) to understand the impact of (and
trends in) company-specific cost drivers
such as labor rates and productivity, airport
costs, maintenance costs, etc., which are
more controllable by management;
• Operating revenue per ASM (RASM)
excludes a favorable, one-time, non-cash
Special mileage plan revenue item of $192
million primarily related to our modified
affinity card agreement with Bank of
America, executed in July 2013. In
accordance with accounting standards, we
recorded this item in the the third quarter,
and it reflects a non-cash adjustment of the
value of miles outstanding in the program.
We believe it is appropriate to exclude this
special revenue item from recurring
revenues from operations;
• CASM excluding fuel and certain special
items is one of the most important
measures used by management and by the
Air Group Board of Directors in assessing
quarterly and annual cost performance;
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ŠForm 10-K