Alaska Airlines and Horizon Air 2013 Annual Report Download - page 95

compete with several other domestic and
international carriers, but to a lesser extent than
our principal competitors.
We believe that the following principal
competitive factors are important to our
customers:
• Safety record
• Customer service and reputation
We compete with other airlines in areas of
customer service such as on-time
performance, passenger amenities—
including first class seating, quality of buy-
on-board products, aircraft type, and
comfort. In 2013, Alaska Airlines ranked
“Highest in Customer Satisfaction among
Traditional Network Carriers” by J.D. Power
and Associates for the sixth year in a row.
All of our 2013 mainline aircraft deliveries
included the Boeing Sky Interior and the
innovative and comfortable Recaro seats. In
2014, we will continue to improve our in-
flight experience with our cabin upgrade
project featuring the Recaro seats with
power outlets for every passenger flying our
B737-800, -900, and -900ER aircraft.
Additionally, FlightStats.com has named
Alaska Airlines the No. 1 on-time major
carrier in North America for each of the past
three years, 2010-2012, and as of
November 2013, we were the No. 1 on-time
major carrier in North America for the past
12 months.
• Fares and ancillary services
The pricing of fares is a significant
competitive factor in the airline industry, and
the increased availability of fare information
on the Internet allows travelers to easily
compare fares and identify competitor
promotions and discounts. Pricing is driven
by a variety of factors, including but not
limited to, market-specific capacity, market
share per route/geographic area, cost
structure, fare vs. ancillary revenue
strategies, and demand.
For example, airlines often discount fares to
drive traffic in new markets or to stimulate
traffic when necessary to improve load
factors. In addition, legacy carriers have
been able to reduce their operating costs
through bankruptcies and mergers, while
low-cost carriers have continued to grow
their fleets and expand their networks,
potentially enabling them to better control
costs per available seat mile (the average
cost to fly an aircraft seat (empty or full) one
mile), which in turn may enable them to
lower their fares. These factors can reduce
our pricing power and that of the airline
industry as a whole.
The domestic airline capacity is dominated
by four large carriers, representing
approximately 85% of total seats.
Accordingly, if these carriers discount their
fares or enter into our core markets, we
must match those fares in order to maintain
our load factors, often resulting in year-over-
year decreases in our yields. We will defend
our core markets vigorously, and if
necessary redeploy capacity to better match
supply with demand. We believe the
restructuring we've made over the past
decade has decreased our costs to the
point we can offer low fares while still
earning a pre-tax margin greater than 10%.
• Routes served, flight schedules,
codesharing and interline relationships, and
frequent flyer programs
We also compete with other airlines based
on markets served, the frequency of service
to those markets, and frequent flyer
opportunities. Some airlines have more
extensive route structures than we do, and
they offer significantly more international
routes. In order to expand opportunities for
our customers, we enter into codesharing
and interline relationships with other airlines
that provide reciprocal frequent flyer mileage
credit and redemption privileges. These
relationships allow us to offer our customers
access to more destinations than we can on
our own, gain exposure in markets we don't
serve, and allow our customers more
opportunities to earn and redeem frequent
flyer miles. In December 2013, we
announced that our Mileage Plan members
will be able to earn elite qualifying miles on
all of our international parters, providing
them with even more utility from their
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ŠForm 10-K