Alaska Airlines and Horizon Air 2013 Annual Report Download - page 125

Passenger Revenue—Mainline
Mainline passenger revenue for 2012 increased
by 10% on a 6.3% increase in capacity and a
3.2% increase in PRASM compared to 2011. The
increase in capacity was driven by new routes
added in 2012, most of which were to and from
Hawaii. The increase in PRASM was driven by a
1.4% rise in ticket yield and a 1.4-point increase
in load factor compared to the prior year. The
increase in yield was due to strong demand
throughout 2012, while the increase in load
factor was due to adding more traffic in our high
density markets.
Passenger Revenue—Regional
Regional passenger revenue increased by $33
million, or 5%, compared to 2011 on a 4.4%
increase in capacity and flat PRASM compared to
2011. PRASM was affected by a 1.1% decrease
in ticket yield, offset by a 1.2-point increase in
load factor compared to the prior year. The
decrease in yield was due to increased
competition in certain markets, while the
increase in load factor was due to better
matching of supply with demand.
Freight and Mail
Freight and mail revenue increased $2 million, or
2%, primarily due to higher freight volumes and
an increase in fuel and security charges, which
offset a decrease in mail volumes.
Other—Net
Other–net revenue increased $15 million, or 3%,
from 2011. This is primarily due to an increase
in our Mileage Plan revenues of 7% and buy-on-
board sales of 20%. Buy-on-board improved due
to an increase in food sales of 24% and
beverage sales of 14%. The increases were
partially offset by a decrease in bag fees of 2%
due to general shifts in customer behavior and
our Club 49 program that launched in the fourth
quarter of 2011, which waives the checked bag
fee for residents in the state of Alaska who have
joined the program.
OPERATING EXPENSES
Total operating expenses increased $256
million, or 7%, compared to 2011 mostly as a
result of higher fuel costs. We believe it is useful
to summarize operating expenses as follows,
which is consistent with the way expenses are
reported internally and evaluated by
management:
Year Ended December 31,
(in millions) 2012 2011
%
Change
Fuel expense ............ $1,459 $1,298 12
Non-fuel expenses ........ 2,666 2,571 4
Total Operating Expenses . . $4,125 $3,869 7
Significant operating expense variances from
2011 are more fully described below.
Wages and Benefits
Wages and benefits increased during 2012 by
$47 million, or 5%, compared to 2011. The
primary components of wages and benefits are
shown in the following table:
Year Ended
December 31,
(in millions) 2012 2011
%
Change
Wages ................... $ 745 $721 3
Pension—Defined benefit
plans .................. 57 42 36
Defined contribution plans . . . 43 42 2
Medical and other benefits . . . 135 129 5
Payroll taxes .............. 58 57 2
Total wages and benefits .... $1,038 $991 5
Wages increased 3% on a 1% increase in FTEs
as a result of increased flying and higher wage
rates throughout our different employee groups
which have wage step increases in their
contracts. The contracts with the different
employee groups contain important productivity
improvements, which resulted in a 3.5% increase
in the number of passengers handled per FTE.
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ŠForm 10-K